Immediate annuities offer not only the security of lifelong income but also tax advantages. Each payment is partially untaxed as a return of principal, at least initially. In most cases, the tax-free treatment ends after you have received the amount of principal in the contract. However, if an immediate annuity is purchased through the conversion of a life insurance policy, you can receive partially tax-free income indefinitely.

There are some drawbacks to immediate annuities, but they may be overcome. You don