Immediate Annuities: Suitable?

Immediate Annuities are issued by insurance carriers and are designed to provide a stream of immediate income for life, or for a fixed time period.

Deferred variable and fixed annuities have an immediate annuitization feature. Immediate annuities can provide for fixed payments or variable payments based on the performance of underlying variable funds selected by the purchaser.

Immediate annuity income is tax advantaged in that a portion of each payment is treated as a tax-free return of basis until the entire tax basis is recovered.

Suitable investors of immediate annuities may include:

•  Deferred annuity owners who want to take their income in the most tax advantageous way.

•  Conservative, income oriented investors who don't want to take any market risk.

Immediate annuity may not be suitable for:

Immediate annuities may not be suitable for investors who:

•  May need access to principal (although some immediate annuities provide an ability to cancel and receive a portion of the original investment).

•  Fall in a high ordinary income bracket and may achieve higher after-tax income through municipal bonds or a capital gains oriented investment.