Which type of annuity allows immediate payouts within 12 months after purchase?

An immediate annuity is designed to provide payouts to the annuitant within a year of purchase, often starting as soon as the next month after the investment. This type of annuity is typically funded with a lump sum payment, which is then converted into a stream of income that can last for a specified period or even for the lifetime of the annuitant.

This structure is particularly attractive for individuals looking for a reliable income source in retirement shortly after they invest their funds. Since immediate annuities start payments so quickly, they’re well-suited for individuals needing immediate income, as opposed to those who may not need access to their funds for a longer time frame.

In contrast, a deferred annuity delays payments for a longer period, which means that the funds accumulate over time before any distributions begin. A single premium annuity refers to the method of funding, indicating that it is purchased with one lump sum; however, it can be immediate or deferred based on the structure. A lifetime annuity guarantees payments for the annuitant's lifetime, but it doesn’t specify when payouts begin, as the term itself doesn't dictate the timing of the income stream.

Therefore, the classification as an immediate annuity is crucial when discussing the timing