Home Life insurance Annuities The ups and downs of immediate variable annuities The ups and downs of immediate variable annuities Written by Insure.com | Posted on: December 7, 2009 Why you can trust Insure.com Quality Verified At Insure.com, we are committed to providing the timely, accurate and expert information consumers need to make smart insurance decisions. All our content is written and reviewed by industry professionals and insurance experts. Our team carefully vets our rate data to ensure we only provide reliable and up-to-date insurance pricing. We follow the highest editorial standards. Our content is based solely on objective research and data gathering. We maintain strict editorial independence to ensure unbiased coverage of the insurance industry. 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. For 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. × Get Free Life Insurance Quotes Today! Zip Code Please enter valid zip Age Age 16 – 20 21 – 24 25 – 34 35 – 44 45 – 54 55 – 64 65+ Coverage Amount Coverage Amount $50,000 – $100,000 $100,000 – $200,000 $200,000 – $300,000 $400,000 – $500,000 $500,000 – $1,000,000 $1,000,000 – $2,000,000 $2,000,000 – $5,000,000 $5,000,000+ Coverage Type Coverage Type Whole Life Term Life Final Expense Not Sure Gender Gender Male Female Non-Binary Tobacco Use Yes No Compare Quotes QuickTake Annuity lifetime payouts: How much will you get? What is an annuity? What to know about the retirement income option Annuities articles: How to buy wisely Equity-indexed annuities: Indexing methods explained Waivers provide access to your annuity before retirement Annuity Surrender: Getting out of your annuity See more > Related Articles Term Life Insurance Index: Sales rise by 1% in Q2, reaching record high By Nupur Gambhir How much term life insurance costs By Huma Naeem The 10 largest life insurance companies By Chris Kissell How to get life insurance if you’re uninsurable By Penny Gusner What to avoid before the life insurance medical exam By Desiree Ghazi Life insurance for people with dementia By Satta Sarmah-Hightower ZIP Code Please enter valid ZIP See rates