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The 19 Sources of Retirement Income: Immediate Annuity Income

In this episode, John continues his series on the 19 Sources of Retirement Income. He explainins how out of the many types of annuities, the immediate annuity can provide a guaranteed, tax-advantaged income stream in retirement.

John is the author of 5 Ways Your Wealth is Under Attack and It’s Your Wealth – Keep It.” He has lectured extensively on financial planning and is a recipient of the Five StarSM Wealth Manager Award.

Don’t miss these takeaways:

  • Firstly, an annuity is a type of investment product offered by an insurance company.
  • Next, there are several types of annuities: variable, fixed, and indexed annuities.
  • With an immediate annuity, you give a certain sum to the insurance company. In exchange, the company provides you with a lifetime income. You can begin withdrawing this income after the age of 59 ½.
  • Finally, you can use your IRA to purchase an annuity. The greater tax benefit lies with a non-IRA annuity—a non-qualified asset, which means that you use after-tax money to purchase it.

This is how an immediate annuity works:

  • First, let’s say you take a lump sum (say $100,000) and purchase an annuity from an insurance company. You receive an income that you cannot outlive. It’s also at a higher rate of interest than you can get from a long-term CD or interest-bearing bank account.
  • In addition, you only pay tax on the portion of your annuity payout that is deemed interest. The portion that is a return of your principle is not taxed. (This is referred to as the “annuity exclusion ratio.”)
  • Finally, you can provide for your heirs by including a “period certain” in your annuity contract. This means that if you and your spouse pass away before a certain amount of time has passed (usually 10 or 20 years), your beneficiaries receive the remaining payments.


Purchasing an immediate annuity is similar to creating a lifetime private pension. In addition, it allows you to enjoy the money you worked so hard to save, and still pass it to your heirs.

For more, listen here. Then download our 19 Sources of Retirement Income and find out more ways to increase your retirement income.

If you are new to Smallwood Wealth, schedule a Wealth Curve Conversation by clicking this link. You can also connect with us on social media. You can all us at (800) 797-1000. Set up a free, no-obligation 30-minute phone call with an advisor.

Discuss with them immediate annuities, all of the nuances within annuities, and many other ways to fund your retirement.


Guaranteed rates quoted on annuity products are subject to the financial stability and claims paying ability of the issuing insurance company. The rates shown are obtained from the website mrannuity.com and are effective as of date stated. While we believe this information to be valid we cannot guarantee its accuracy or timeliness. Many annuities include various surrender charges for early withdrawals. Be sure to obtain full product information from our financial professionals before considering any product. Please be sure to ask any questions to your financial professional.


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