YOU ASK:

Are single-premium immediate fixed annuities a good idea?

WE ANSWER:

As long as one can afford it, purchasing a single-premium immediate fixed annuity is highly recommended for several reasons.

First of all, the immediate fixed annuity payout period follows the payment almost immediately, and secondly, under a single-premium fixed annuity the owner does not have to go through the hassle of paying any more premiums or managing the policy.

The Single-Premium Aspect of Immediate Fixed Annuities

There are a lot of benefits of a buying a fixed annuity with a lump sum payment.

You just pay the whole value of the annuity in one large premium installment, and you instantly get a guaranteed lifetime income without having to worry about other premiums.

Purchasing a fixed annuity also gives you the security of predicting the exact rate of return.

There is, however, one major drawback: not everybody will have such a large lump sum of money to invest in purchasing an annuity.

Immediate Fixed Annuities - Advantages

Even if you don't have a large lump sum, you can still benefit from the privileges that an immediate fixed annuity has to offer. Immediate fixed annuity premiums can also be paid on a monthly or an annual basis.

  • Immediate fixed annuities provide the security of having a guaranteed lifetime income which can never be outlived.
  • Payout of immediate fixed annuity benefits starts one payment interval from the annuity inception date. You don't need to wait for the accumulation period to end before you start getting funds from the annuity.
  • Immediate fixed annuities usually have considerably high returns, because the interest rates credited to immediate annuities are usually higher. Since part of the principal is returned to the owner with each installment, larger amounts provided by interest are received.
  • As with any fixed annuity, the principal is safe from any market fluctuations.
  • Immediate fixed annuities receive very favorable tax treatment, since only the interest part of the annuity is subject to income tax.
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