Immediate fixed annuity

Fixed Income Options

 * Fixed
 * Graded
 * Inflation Indexed

Annuitization Options
In addition to the first four common annuitization options available to an immediate variable annuitization, immediate fixed annuities offer a large number of additional options:
 * Single life only. As the annuitant, you receive regular income payments for your lifetime, ending at your death. (Payments are largest with this option.)
 * Single life with a guaranteed number of years. As the annuitant, you receive payments as long as you live, but not less than a guaranteed period. If you die before the period ends, your beneficiaries receive the remaining payments. The guaranteed period covers 5 to 50 years for nonqualified (after-tax) assets and up to your life expectancy for qualified (pre-tax) assets.
 * Joint and survivor life only. Payments are made as long as you (the annuitant) or another person (the joint annuitant), such as your spouse, are living. Often you can choose the amount of the remaining annuity payments will be a percentage (50%, 66.67%, 75% or 100%) of the amount that was payable while the annuitant was alive.
 * Joint and survivor with a guaranteed number of years. Payments are made as long as you (the annuitant) or another person (the joint annuitant) are living, but not less than a guaranteed period. If both you and the joint annuitant die before the period ends, your beneficiaries receive the remaining payments. The guaranteed period covers 5 to 50 years for nonqualified (after-tax) assets and up to your life expectancy for qualified (pre-tax) assets.
 * Single life with installment refund. As the annuitant, you receive fixed payments for your lifetime. If you die and the sum of the income payments you’ve received is less than your purchase premium, your beneficiaries will receive the difference through monthly payments.
 * Single life with full cash refund. As the annuitant,you receive fixed payments for your lifetime. If you die and the sum of the income payments you've received is less than your purchase premium, your beneficiaries receive a lump-sum refund of the difference.
 * Joint & Survivor with installment refund. Payments are made as long as you (the annuitant) or another person (the joint annuitant) are living. If both you and the joint annuitant die and the sum of the income payments you’ve received is less than your purchase premium, your beneficiaries will receive the difference through monthly payments.
 * Joint & Survivor with full cash refund. Payments are made as long as you (the annuitant) or another person (the joint annuitant) are living. If both you and the joint annuitant die and the sum of the income payments you’ve received is less than your purchase premium, your beneficiaries receive a lump-sum refund of the difference.
 * Guaranteed number of years only. As the annuitant, you receive fixed payments for a guaranteed number of years (5 to 50 years for nonqualified (after-tax) assets and up to your life expectancy for qualified (pre-tax) assets). If you die before this period ends, your beneficiaries receive the remaining payments. Payments end when the guaranteed period ends, whether or not you or your beneficiaries are still living.

Exclusion Ratio
Fixed immediate annuities receive a degree of tax relief (for non-qualified dollars) due to the income exclusion rules. The IRS allows the investment in the contract to be recovered over the annuitant's life expectancy. The calculation of the Exclusion Ration is made according to the General Rule (found in IRS Publication 939 General Rule for Pensions and Annuities. The annuity payments will be partially taxable due to the exclusion over the recipient's life expectancy. After this term. the full income payment will be taxed. If the owner dies before the total investment in the contract is recovered, and annuity payments cease as a result of his death, the un-recovered amount is allowed as a deduction to the owner on the final tax return.

Credit Ratings and State Guarantee Funds
The income from an immediate fixed annuity is subject to the creditworthiness of the insurer. You should purchase immediate fixed annuities from insurer's gaining the highest credit worthiness ratings from the five insurance rating firms.


 * A.M. Best
 * Fitch Ratings
 * Standard & Poor's
 * Moody's
 * Weiss Ratings

In case of insurer default, your State Guarantee Fund will attempt to find a replacement insurer for your contract, and will offer insurance on a given amount of annuity investment (usually up to $100,000, but greater in some states). The following links provide information on state guarantee limits, as well as what happens as a consequence of an insurance company failure.


 * State Guarantee Funds
 * NOLHGA:What Happens When An Insurance Company Fails

Academic Papers

 * Babbel, David F, and Merrill, Craig B., "Rational Decumulation" May 22, 2007. Available at http://fic.wharton.upenn.edu/fic/papers/06/0614.pdf
 * Walsh, Thomas A., "The (Mostly) Pros and (Few) Cons of Lifetime Payout Annuities" TIAA-CREF Intitute, April 8, 2002. Available at http://www.tiaa-crefinstitute.org/research/papers/docs/040802.pdf