Annuities are contracts offered by insurance companies that assure investors a guaranteed rate of interest. Annuities are most often used to create a retirement plan and secure one’s financial future for the golden years. In fact they can be traced back to as early as the Roman Empire when citizens could make a one-time payment and receive an annual stipend for the rest of their life. Most annuities offer investors a chance to invest in their future and benefit from the tax deferral features of the annuity. However immediate annuities are quite different, for they allow the investor to make a one-time bulk payment and after which, virtually immediately, the investor begins to receive income payments. The amount of income received from an immediate annuity depends on many factors such as the age of the investor, life expectancy and expected rate of interest on the investment.

Immediate annuities offer individuals a chance to create their own pension plan or supplement the pension that they are or will be receiving. Should you invest in immediate annuities? This question can be answered only after studying the individual’s financial situation and their needs and requirements. Immediate annuities are ideal for people who are about to retire and wish to invest their savings in a way that will provide them a regular income for a fixed period of time or for the rest of their life. It is however not particularly useful for professionals who still have many working years before them. Furthermore since the income payments begin soon after the investment is made they are taxed accordingly. Other annuities such as the deferred annuity allows the investment to compound and grow, without being taxed yearly unlike the traditional CD.

It is advisable to consult an annuity broker before making an investment so that the individual can benefit from the advice and guidance of the independent financial advisor.