Income Now or Income Later: Deciding Between an Immediate or a Deferred Fixed Annuity

If you are nearing or are in retirement, you may be thinking about moving some of your savings into an annuity. Taking advantage of what an annuity has to offer – tax-preferred treatment, safety and security and a guaranteed cash flow – is a great way to maximize what you’ve already saved for retirement. However, you have to decide between an immediate annuity, in which you’d start receiving annuity income payments right away, or a deferred fixed annuity, where you can build your principal’s value before converting it into an income stream, depending on your short and long term financial goals.

With an immediate annuity, you start receiving a monthly income stream right away, one to 12 months from purchase date. This income stream is guaranteed for life, with options to add survivor benefits, period certain payment terms or cash refund death benefits. These options will reduce your monthly benefits to offset the cost of adding them to your annuity. Individuals who are concerned that they didn’t save enough for retirement or who feel they started saving too late should consider an immediate annuity over a deferred fixed annuity.

A deferred fixed annuity is a good option if you don’t need an immediate payout, and you would like to increase your retirement savings even more. There are many different types of fixed annuity products, including multi-year guaranteed deferred annuities, in which the purchaser’s interest rate is guaranteed for a set time period, and fixed indexed annuities, where the interest rate is tied to the performance of a particular stock market index, such as the S&P 500. These fixed annuity products have one thing in common – your funds are locked up for a period of time, and you will face surrender charges if you withdraw (other than penalty free amounts, typically 10% annually) before the time period expires. In this case, it is best to buy a deferred fixed annuity with funds that won’t be needed in the near future.

The first decision that you need to make when deciding to buy an annuity is if you want an immediate or deferred product. AnnuityAdviceOnline.com Specialists are trained to help you look at your situation from all angles. They can offer suggestions on which, if any, annuity product is a good match for you. Call the AnnuityAdviceOnline.com Specialists today at 1-888-837-4226 for free, personalized fixed annuity advice.