Eternal Cash Flow

For a life-long stream of income, consider buying an immediate annuity. As the name suggests, with an immediate annuity you pay a lump-sum now and begin to receive a regular income stream right away. What’s more, today’s versions offer improvements over earlier models.

Traditionally, immediate annuities paid out fixed amounts with no adjustment for inflation. Moreover, they offered you no access to your money: one day you had a large sum in your retirement account but after annuitizing (choosing an immediate annuity) all you had was a monthly or quarterly check.

Today, many immediate annuities offer variable payouts, meaning your income can grow if the funds are invested wisely. In addition, you may have liquidity options:

• You might be able to withdraw 20 percent of your assets each year, even after annuitizing.

• You might be able to take out some or even all of your money in the first five years after annuitizing.

• You might have access to a sum of money in case of an emergency, such as a medical crisis.

With an immediate annuity you can take early retirement without having to pay a 10 percent penalty tax on early (before age 59 1/2) withdrawals. Payments vary widely so it pays to shop around before buying. Besides life insurers, banks, brokers and mutual fund companies may offer immediate annuities.