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When you buy an immediate variable annuity (VA), you pay a lump sum to an insurance company and start receiving monthly payments immediately. As with any variable annuity, your payments rise or fall, depending on the performance of your investment. You can be guaranteed lifetime income and a death benefit paid to your beneficiary when you die.

annuitiesFor some investors, immediate variable annuities are a more attractive option than immediate fixed annuities because you aren’t stuck receiving the same amount of cash each month. If your investments perform well, you can receive a bigger check each month and beat the cost of inflation, which won’t happen if you have a fixed annuity.

Immediate variable annuities may be a smart choice if you are retired or about to retire, have a lump sum of money to invest and want to choose how that money is invested in stock, bond and money market portfolios, according to the Insured Retirement Institute.

Immediate VAs offer a number of benefits: guaranteed income, opportunities to earn money in the stock market and a death benefit. But the more guaranteed benefits  in your VA contract, the higher the charges may be. The fees for immediate VAs vary by company, but the average expense ratio is 1.92 percent as of March 8, according to  Morningstar, Inc., an independent investment research company.

Most investors should consider annuity products only after they have made maximum contributions to their 401(k)s and other pre-tax retirement plans, according to the Financial Industry Regulatory Authority. Other before-tax retirement plans, such as 401(k)s, not only let you defer taxes on investment gains, but also allow you to reduce your current taxable income.

Though other options may be cheaper, they are not as secure. Immediate variable annuities guarantee lifetime income, whereas IRAs or 401(k)s do not.

Because some investors get queasy about a variable annuity’s unpredictable payouts, some immediate VAs guarantee a percentage of your first payment. But this guarantee may come with the price of higher fees.

Depending on the options you choose, beware that you might not be able to get out of an immediate VA. According to the Insured Retirement Institute, a process called commutation in some contracts allows you to terminate VAs within a certain time period and receive the full value of the undistributed payments.