Which describes an Immediate Annuity?

Which describes an Immediate Annuity?

• A. You make one lump sum payment and receive a stream of ongoing payments.
• B. You make regular payments over time for a fixed period.
• C. You receive a lump sum at retirement.
• D. You receive a single lump sum payout at the end.

Answer: (A)

An immediate annuity is a contract where you fund it with a single upfront payment and then start receiving a regular stream of payments right away (monthly, quarterly, etc.). The key is that the income begins nearly immediately after funding the contract, and the payments can continue for a life, a fixed period, or another defined term. This description matches making one lump-sum payment and then receiving ongoing payments, which is why that option is the best choice. The other scenarios describe situations where payments start later (deferred annuity) or where you receive a lump sum rather than ongoing payments.

An immediate annuity is a contract where you fund it with a single upfront payment and then start receiving a regular stream of payments right away (monthly, quarterly, etc.). The key is that the income begins nearly immediately after funding the contract, and the payments can continue for a life, a fixed period, or another defined term.

This description matches making one lump-sum payment and then receiving ongoing payments, which is why that option is the best choice. The other scenarios describe situations where payments start later (deferred annuity) or where you receive a lump sum rather than ongoing payments.