Single Payment Annuities

Single payment annuities can be highly useful if a person has a large amount to be invested or rolled over at one time. Though often used by seniors who may have already retired, it can also be useful for those who have larger sums of money from an inheritance or severance package or other windfalls and want to use this for their future security.

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Single payment annuities will require a sizeable investment instead of monthly or yearly investment amounts. However, there are a few companies that may require as little as $5000 for a single premium investment. They can be applied to almost any type of annuity investment product, such as fixed, variable, or indexed annuities payments can be deferred or immediate as this type of annuity refers only to the amount required to establish a fund.

Single payment annuities

The single premium annuity is very attractive to retirees or those very close to retirement, as it requires only a single payment to establish the investment and the income stream. Multiple payment premium annuities may require a regular investment on a schedule and be more useful to those with a longer wage-earning period in front of them.

Single premium annuities can be deferred or immediate payment. Usually the immediate annuity payment begins 30 days after the fund is established (some variations are possible). Retirees might find an immediate payment single premium annuity suits their purposes exactly and begins to supplement their income immediately.

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As always, consideration must be given to your long-term goals, your financial status and how much of an investment you can afford to make before selecting a single premium or a multiple premium annuity. The usual considerations must also be given as to whether a fixed annuity or an indexed annuity is preferable in your financial circumstances.

One drawback to single payment annuities is that they require a larger sum to be deposited immediately. For younger persons this may not be attractive or they may require a longer period to acquire their funds making other funding options more attractive in their case. Adding funds to single premium annuities is not usually possible. It is a single sum investment tool. These annuities can have a preset life or can last the entire life of the investor.

The other drawback to single premium annuities is that companies will often have a significantly large surrender fee if funds must be withdrawn early. The terms on any annuity should be read carefully as well as all fees clearly lined out and understood.

For investors fewer than 59 in the US there are also significant penalties in terms of tax for withdrawing from certain types of annuities early. It is the responsibility of the wise investor to understand the applicable tax laws when it comes to annuities.

Single premium annuities have their place in any long term or short-term investment strategy and the best types can be determined only by examining your timeline for establishing the income stream, how much you have to invest and how much you must see in return from your investment to make it worthwhile.

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