(SPIAs), or single premium immediate annuities can be purchased by making one single deposit and starts making regular monthly payments to you immediately (usually 30 days from the date of deposit). You can, if you wish, defer the date the payments begin.
You are giving an insurance company your money. In turn, the insurance company promises to return your money to you over a specific period of time. You can arrange to have the payments set up however you want. Make sure you know how you want the payments you receive, because after you sign an agreement, the payment schedule will not be changed. You can’t request that your money be returned in a lump sum either. The contract cannot be revised or cashed in once you’ve set it up.
Immediate annuities provide many advantages to the buyer including a stable lifetime of income that is guaranteed for a specific period of time. Another benefit is that interest rates on annuities are always higher than CD or Treasury rates. Because part of the principal is returned with each payment you receive, greater amounts are received than interest alone would provide. Also, annuities are guaranteed by the assets of the insurer and do not fluctuate in the financial markets, and they are an asset towards retirement.
In pricing an immediate annuity, the average life expectancy of the person receiving the payments is a key factor. When you die, payments are stopped. Obviously, if you live to a ripe old age, the benefits you receive are far greater than if you died two years after you invested.
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