Annuities > Immediate Variable Annuities
Buying an immediate variable annuity (VA) involves paying a lump sum to an insurance company and receiving monthly payments right away. This is often done by people who have accumulated large savings for retirement. Your payments will rise or fall; depending on how well your investment is performing. A lifetime income and a death benefit paid to your beneficiary can be guaranteed. Many insurers also guarantee that your monthly payments will never fall below a certain level.
For some investors, immediate variable annuities are more attractive than immediate fixed annuities because you can get a bigger check each month and beat the cost of inflation if your investments are performing well. This isn't an option if you have a fixed annuity.
Most advisors will tell you that people not of retirement age should stay away from immediate VAs. It is far cheaper for you to maximize your 401(k) plan first, though it does not guarantee a lifetime income.
Fees for immediate VAs vary between companies, but they are generally around 1.8%, and this number rises with additional guaranteed benefits you add. A guaranteed income, the chance of gains in the stock market and a death benefit do not come cheap.