Caution needs to be implemented when considering an immediate annuity. Once your money goes into an immediate annuity, you then lose all control of the principal (your savings) and the income cannot be adjusted either up or down.
Immediate Annuities do have some positive benefits when there is a specific need for a life-time income or guaranteed stream of income for a specific period of time. This type of annuity product is similar to pensions as they provide a monthly income that cannot be changed.
Example: if you’re drawing $2000.00 per month from your immediate annuity and an emergency arises where you need an additional sum of money in any given month, immediate annuity will not be able to accommodate this need. The payments are irrevocable and cannot be changed.
Annuities are best suited for long term investors. Any strategy utilizing investments carries an inherent element of risk. Withdrawals from an annuity prior to age 59 1/2 are subject to a 10% tax penalty in addition to income taxes on earnings. Guarantees are based upon the claims paying ability of the underlying insurance agency. Riders are available as an addition to a purchase of an annuity contract, however, there are additional costs associates with the addition of a rider.