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Simple English definitions for legal terms
immediate annuity
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A quick definition of immediate annuity:
An immediate annuity is when someone pays a lump sum of money to an insurance or investment company and in return, they receive regular payments for a certain period of time. These payments stop when the person dies. There are different types of annuities, such as fixed annuities that guarantee a set payment, and variable annuities that depend on investment performance. An annuity can be used as a retirement income source.A more thorough explanation:
An immediate annuity is a type of annuity that begins to pay benefits within the first payment interval. It is paid for with a single premium, and the payments terminate upon the death of the designated beneficiary. An annuity is an obligation to pay a stated sum, usually monthly or annually, to a stated recipient.
For example, if someone purchases an immediate annuity with a lump sum of $100,000, they will begin receiving regular payments immediately. The amount of the payments will depend on the terms of the annuity contract, such as the length of the payment period and the age of the annuitant.
Immediate annuities are often used as a retirement income source. They provide a guaranteed stream of income for life, which can help retirees manage their finances and plan for the future.