Do you have an annuity that pays you a monthly amount, but you wish you could just get it all at once? There is a way to do that called immediate annuities. They are financial contracts that give the recipient regular payments that last the length of the monetary amount the insurance company agrees to pay out of the original annuity contract.
Where Did Immediate Annuities Originate?
An annuity originated during the 1860s when the Equitable Life Assurance Company used to issue financial agreements they called tontines. This was a way to give recipients monthly lifetime payments in return for them giving over a large lump of money. This is what immediate annuities do for today’s recipients. It means that the person makes an annuity investment in return for giving up the larger amount of the original contract.
What is Involved With Immediate Annuities?
How this works is that once the holder of the original annuity sells it to the insurance company, they invest it so they can come up with the payments. The immediate annuities rates will vary depending on how this is done. If these terms are changed in any way, the amount that the person pays for the immediate annuities could have a different purchase price.
As an example, if the person buys some sort of death benefit then the rates could feature higher or lower payments depending on the immediate annuities rates given at the time. The first payments may not happen for as long as a year and then can be taken monthly, quarterly or however agreed in the contract.
What About the Death of the Recipient?
If the person happens to die before all the monies are paid, then the insurance company gets to keep the rest unless they bought into a death benefit option. That is one of the disadvantages of immediate annuities when you weigh the immediate annuities pros and cons.
Another thing that someone who is looking for options for immediate annuities must figure out is how to find the best immediate annuities since there are varying rates of return. You should browse around and check on this before you sign on the dotted line to be sure you are getting the best deal and the best future return on this important investment.
All in all, immediate annuities can be a good investment if it fits your current needs. Be sure to talk to a lawyer or financial counselor if you are unsure about what you should do.