Immediate annuities begin delivering payments to the purchaser as soon as they are deposited. With an immediate annuity, the investor forgoes the benefit of compounding interest tax-free within the account. But this can be more than worth the sacrifice if the investor requires life-long income payments to begin immediately. For example, if an elderly investor's long-term, term maturity bond is redeemed at a time when the investor is ready to retire fully and enjoy the remaining years of his or her life in stability and security, an immediate annuity is probably better than a deferred annuity. Similarly, immediate annuities are often used by employers to provide pension benefits to retired employees. It is a quick and simple option for guaranteeing life-long income on an investment.
Immediate annuities can be either fixed or variable.