With an immediate annuity, you immediately begin receiving income payments soon after you purchase it.
Immediate annuities features
- Immediate annuities are usually purchased with a lump-sum payment
- Investments can fixed or variable
- Investments are tax-deferred, so you don't pay taxes on accumulated earnings until you withdraw your money - only your earnings are taxed as ordinary income
- Income options include a guaranteed payment for life or a specified period of time (guarantees subject to the claims-paying ability of the issuing insurance company; they don’t apply to the investment performance or safety of the underlying investment options)
- Options include death benefits
- Withdrawals before age 59½ are generally subject to a 10% federal income tax penalty as well as ordinary income taxes and early withdrawals are subject to a surrender charge