What Does Income Annuity Mean?

It refers to a special contract between two parties according to which a person gets an agreed sum of money regularly from the other party until a pre-specified period of time. This type of annuity guarantees that the payment of income starts right after the agreement is made. After this initiation, the income annuity starts to be made instantly, but its foundational elements can belong either to changeable or to unchangeable investments. This simply means that the income stipends are not fixed amounts. They may vary for instance depending on the success of the investment.

Income annuities are usually demanded by those people who are about to retire on a pension, and are bought entirely with a single payment. Another expression used for the same contract is ‘immediate annuity’.

Income Annuity Explained

From the investors’ point of view a special care should be taken for the amount of money which is paid for the income annuity. They must compare this amount to the annuity paid for the annuitant most of the times until their death. Investors might opt for flexible investments which make them possible to pay out according to performance, and thus protecting both the client and themselves.