The traditional immediate annuity is now called a “payout annuity,” by some insurance companies. By any name, such annuities can provide lifelong income.
Research indicates that the probability of a favorable outcome is increased if investors’ portfolios are divided between annuitized assets and non-annuitized assets. If a portfolio consists only of non-annuitized assets, investors may run out of money, even with supposedly safe withdrawal rates.
If you overlay annuities, for part of the portfolio, your prospects for ongoing income are much better. Just as non-annuitized assets should include both stocks and bonds, investors may be better off with both immediate fixed annuities and immediate variable annuities that hold stock funds.
Historically, though, immediate annuities have been illiquid and irreversible. Thus, some insurers are seeking to address such concerns by including a liquidity feature. For example, at the fifth, 10th, and 15th anniversary of your first annuity payment, you might be able to get a lump-sum that will, in turn, reduce future payments.