What is a characteristic of immediate annuities?

What is a characteristic of immediate annuities?

• A. The payments start at a future date
• B. The payments begin immediately after purchase
• C. The payments are made annually
• D. The payments vary with the market

Answer: (B)

Immediate annuities are designed to start making payments to the annuitant shortly after they are purchased, often within a month. This characteristic distinguishes immediate annuities from deferred annuities, where payments begin at a later date. As soon as an individual invests in an immediate annuity, they can expect to receive periodic payments, which can be structured monthly, quarterly, or annually, but the key aspect is the prompt initiation of those payments immediately following the purchase. This provides a steady income stream right away, making it particularly appealing for retirees or individuals looking for immediate financial support.

Immediate annuities are designed to start making payments to the annuitant shortly after they are purchased, often within a month. This characteristic distinguishes immediate annuities from deferred annuities, where payments begin at a later date. As soon as an individual invests in an immediate annuity, they can expect to receive periodic payments, which can be structured monthly, quarterly, or annually, but the key aspect is the prompt initiation of those payments immediately following the purchase. This provides a steady income stream right away, making it particularly appealing for retirees or individuals looking for immediate financial support.