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Immediate Annuities

An immediate annuity is designed primarily to pay income benefit payments one period after purchase of the annuity. Since most immediate annuities make monthly payments, an immediate annuity would typically pay its first payment one month (30 days) from the purchase date. If, however, a client needs an annual income, the first payment will begin one year from the purchase date. Thus, an immediate annuity has a relatively short accumulation period. As you might guess immediate annuities can only be purchased with a single premium payment and are often called single-premium immediate annuities, or SPIAs. These types of annuities cannot simultaneously accept periodic funding payments by the owner and pay out income to the annuitant/owner.

A once-snubbed annuity product—the income annuity—appears to be gaining a foothold in the broad annuity marketplace and in the practices of advisors who serve the boomer and retirement income markets. Two recent studies show gains for the guaranteed income products in 2011 to $8.2 billion from $7.7 billion in 2010 (See Table 2.2). The average age of a SPIA buyer is 73.


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