How Does A Fixed Immediate Annuity Work?

Submitted by: Denisdw Warner

Investment products may well scare you due to the risk associated with them. But investments and pensions may well not bring sufficient income to support you forever. The most important part of retirement is safety and reliability of the income- you need to rely on that. A fixed immediate annuity is exactly that- a source of reliable and dependable monthly income.

If you are lucky enough to have an employer sponsored pension or retirement account, you need to decide what to do with those funds when retirement approaches. Pension annuities are typically offered by the pension fund manager when you retire, and they will likely contact you prior to to try and sell it to you. Basically, you are trading in the funds in your pension for steady income in retirement. Based entirely on your age, you may give them$ 100, 000 in exchange for$7, 000 a year – this is similar to a fixed immediate annuity, however the products offered by your pension fund manager may not be your best option.

Don’t think that you have to take this first offer- you are not required to buy the fixed immediate annuity the pension administrator offers. It’s not uncommon for people to do so but they miss out on better options. There are always other options to consider, so don’t take the first thing that comes by!

You may not be interested in a fixed immediate annuity at all for your retirement income, but this might be the only thing your pension advisor offers. You can link earnings on annuities to investments in mutual funds- these are variable annuities. You can also link income and appreciation rates to market indexes- these are indexed annuities. There are a lot of choices and paths to chose from for retirement income.

Another misconception is that many people believe that to realize any of the gains in the market and grow your money, you must be willing to risk losses and see the balance of your money decrease. This is only the case with certain types of variable annuities, and is not the case in fixed immediate annuities. The essence of a fixed immediate annuity is that you transfer the risk of loss to the annuity insurance company, you and, if applicable, a co- recipient, can never outlive your income. That person may be you, a spouse, or even a child. In that case, if the investor were to die, the payments would then be converted to their heirs. Set up correctly, a guaranteed, immediate fixed annuity will keep paying you in retirement for your entire lifetime.

The fixed immediate annuity is first and foremost a guarantee You can stop worrying about stock market fluctuations, knowing your money is secure. You will not outlive your retirement money, and you can rely on steady and consistent monthly payments.

The only downside is that it is a rigid long term contract. You can’t withdraw your funds once you purchase a fixed immediate annuity. You will not realize additional gains other than what the contract terms spell out. Even if your financial situation changes the terms of a fixed immediate annuity remain the same. But lifetime income may be worth it- a good advisor can help you understand the risks and rewards of a fixed immediate annuity.

About the Author: When your interest just expects more, make it a point to go along with this link to Immediate Annuities and stock up on Immediate Annuities at

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