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IMMEDIATE ANNUITY
One of the main categories of annuities is called an immediate annuity. If you purchase this type of annuity, you will have to pay a specified amount of money each month or year or quarterly or semi-annually. Your benefit payments will normally start quite soon after you purchase an immediate annuity, hence the name. For example, you may begin receiving payments within one year after purchasing an immediate annuity. The most common type of premium is a single premium for this type of annuity. You can choose to make your first payment for an immediate annuity as soon as thirty days after signing your contract or as long as one year after purchase, depending on your insurance company.

There are two options for an immediate annuity rate: a fixed rate or variable rate. The fixed rate guarantees you a set amount of income that will not change. On the other hand, the amount you receive from a variable rate annuity will vary, depending on the performance of the specific investments of your annuity. Some of the determining factors of the amount include the term or length of time of your annuity contract, the amount of your initial premium and the specific guarantees issued by your insurance company
Advantages of an Immediate Annuity
  • Financial SecurityOne of the main advantages of an immediate annuity is that you can continue to receive a stable income for the rest of your life. You can choose to receive payments for a set period of time or until you die. This means that you will not outlive your income.
  • Higher ReturnsAnother advantage of immediate annuities is that they tend to pay higher returns than many other investment options.
  • Protected PrincipalWith an immediate annuity, your funds will always remain safe. This means that your money will be protected, regardless of the current financial market conditions.
  • Easy to ManageYet another benefit of purchasing an immediate annuity is the fact that it is very simple to manage. There is no need for you to continuously watch the market to see if it is performing well or poorly, you don’t need to create any reports and you won’t have to be concerned about managing any dividends.
DEFERRED ANNUITY
One main category of annuities is called a deferred annuity, and it refers to one in which you will not be paid any income by your insurance provider until a specific time in the future outlined in your annuity contract. There are several options regarding the time period. For example, you may begin receiving payments once you or your designated beneficiary reaches a certain age or a specific number of years after signing the annuity contract.

There are two principal phases for a deferred annuity. The first one involves a savings phase during which time you continue to invest your money into the annuity account. The second is called the income phase, and it concerns converting the plan into an annuity and receiving income payments. Furthermore, there are two types of deferred annuities: variable or fixed.
Advantages of a Deferred Annuity
  • Tax BenefitOne of the main advantages of purchasing a deferred annuity is the tax benefit. You will only be taxed on the earnings from this type of annuity when you decide to withdraw the money. Therefore, many people decide to defer their annuity payments until they are ready to retire.
  • Death BenefitYou can also take advantage of the death benefit of a deferred annuity. By designating a beneficiary, you can be guaranteed that your insurance provider will pay this individual the principal as well as the earnings of your investment when you die.
  • Low RiskDeferred annuities present low risk, as they are backed by the insurance company’s financial strength. That’s why it’s important to choose a reputable insurer to purchase a deferred annuity. One way to determine the financial strength of an insurance provider is to search the published ratings of reliable rating companies such as Standard & Poor’s and Moody’s.
  • LiquidityIf you suddenly need money for any reason, a deferred fixed annuity will provide you with liquidity. Although you will normally have to pay surrender charges for a certain period, you can usually withdraw some of the value of your annuity account if required. If you decide to withdraw money after the surrender charge period expires, you won’t be charged any additional fees.
  • Guaranteed ReturnsWhen you purchase a deferred fixed annuity, you will be guaranteed a minimum interest rate, regardless of how the market is performing.
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