Today on the Finance Flash Go! podcast, we’re going to talk more about annuities and a particular variety of annuity called single premium immediate annuities!
An single payment immediate annuity is a product and agreement between an individual and an insurance company that pays the owner a guaranteed income starting pretty much immediately. So, it differs from a deferred annuity, which begins payments at a future date chosen by the annuity owner. Further, an immediate payment annuity is also known as a single-premium immediate annuity (SPIA), an income annuity, or simply an immediate annuity.
So, buyers can choose monthly, quarterly, or annual income. Payments are generally fixed, but variable and inflation-adjusted annuities are also available.
Why do people buy them, though?
People often buy immediate payment annuities to supplement their other retirement income. Moreover, it is also possible to buy an immediate payment annuity that will provide income for a limited period of time, like 5 or 10 years.
Although, one downside of an immediate payment annuity is that payments usually end upon death with the insurance company keeping the remaining balance. So, that’s how the insurance company makes money.
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