Immediate Annuities
by Ellise Walsh

Saving for your financial future and lowering your taxes are very important financial considerations. How you save for the future can have a big impact on your overall tax rate as well as your future comfort in retirement.

Annuities are a popular vehicle for both saving money for future needs like retirement and for sheltering money from current taxes. There are several different kinds of annuity programs available, including fixed rate annuities, variable rate annuities, deferred annuities and immediate annuities.

Immediate annuities differ from deferred annuities mainly in the way they are funded. While deferred annuities are funded through monthly, quarterly or annual payments which build up over time, immediate annuities are funded with one lump sum payment.

After the lump sum payment is deposited into the immediate annuity, the saver may then withdraw a certain amount every month, quarter or year. The amount of the periodic withdrawals will be determined by the amount of the lump sum used to establish the immediate annuity, and by the rate of return generated by the immediate annuity.

As with any type of financial instrument, it is important to find a good, quality annuity provider to handle your immediate annuity. It is important to find an annuity provider who can demonstrate a proven track record of success, both with immediate annuities and with other types of investments.

Before you consider an immediate annuity, you should make sure you limit your shopping to only established, reputable firms. Examine their historical rates of return carefully and make sure their investment strategy matches your own tolerance for risk. Make sure to get any promises made by the annuity salesperson in writing. If they guarantee you a specific interest rate, get it in writing.

Many different types of businesses can provide immediate annuities. Immediate annuities are offered by many banks, credit unions and savings and loan associations. In addition, brokerage firms and mutual fund companies also offer immediate annuities. Shopping around will help you to find the absolute best deal for your immediate annuity.

Annuities can be an important part of any investment program. Be sure to put in some time and effort to understand how these investments work and what you can reasonably expect from an annuity program. The time you take and the work you do will pay big dividends in the future.

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