Most investors who purchase annuities are doing so for future income benefits. However, for those who are in need of income right away the Immediate Annuity (IA) can be a great solution, especially if you 'ladder' your annuitization schedules.

Briefly, an Immediate Annuity contract is bought with a single payment to the insurance company whereby the annuitant (owner) designates a pay out structure suitable to their specific needs.

Payout Options

Immediate Annuity payments generally fall under the following categories:

  • INCOME FOR LIFE  (payments continue until death and cease)
  • PERIOD CERTAIN  (payments for 5,10,15 or 20 years only)
  • PERIOD CERTAIN & LIFE  (payments for 5,10,15 or 20 years and life expectancy, whichever is greater)

These payments can be structured for one person or two, such as a husband and wife.

The payments from an Immediate Annuity are partially tax free (return of principal) and partially taxable (return of earnings). This is commonly known as an "Exclusion Ratio."

For example, let's assume the annuitant is receiving a $2,000 monthly payment; $1,600 of it would be tax-free (return of principal) while only $400.00 (return of earnings) would be taxable.

Laddering your Annuitization Schedules

Laddering your Immediate Annuity schedules can be an effect strategy for some investors as it ensures a continuous, uninterrupted flow of income.

For example, instead of taking a full lump sum and converting it to an IA, take a partial amount and annuitize it for a period certain, say over 5 years. The balance is allowed to grow tax deferred in a Fixed or Variable Annuity. After 5 years, take another partial amount and annuitize that over another 5 years and so on

Payout Rates

Because Immediate Annuity pay-out rates can change almost weekly, we suggest that you contact us directly IF you are serious about purchasing an Immediate Annuity within a relatively short period of time. Otherwise, wait until you are absolutely ready.

Action To Take

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Copyright 1998 Fielder Financial Management, LTD.
All Rights Reserved.

Securities offered through Fortune Financial Services, Inc. member FINRA, SIPC.  Fielder Financial Management, Ltd. not affiliated with Fortune Financial Services, Inc.  Mark Fielder, Financial Professional, CA. Insurance Lic. # 0690576.