Are immediate annuities right for your retirement?


The proposed use of immediate annuities seems to be gaining popularity as a cure for battered retirement funds.

Key Points

Most physicians have retirement plans, which have grown tax-deferred, as well as some after-tax savings. Both types of accounts may be used with annuities.


If after-tax money is used, the stream of income is taxable only to the extent that it represents earnings on your deposit. The stream of income can be a fixed and guaranteed amount or can be invested in stock/bond markets and have a variable return.

The time in which the income stream lasts can be for the annuitant's life, for the length of the joint lives for married couples, or for a certain term (20 or fewer years in most contracts). The fact that some individuals choose the life expectancy option and then die earlier than expected increases the pool of funds to distribute to those who live longer.


Investors should be aware of several potential drawbacks to immediate annuities, including:

Some states guarantee the cash value of an annuity up to $100,000, so it would be advisable to keep annuity purchases from any single company at no more than that amount.


Seek counsel before you take the plunge into annuities. It's important to research the strength of the company involved and determine whether this form of investing is compatible with your goals and needs.

Gradually purchasing small annuities from different companies over several years is one way to decrease the aforementioned risks. Most research also suggests that you should allocate only a portion of your retirement dollars in such a way.

The author is the principal of Wealth Care LLC, based in Merritt Island, Florida. He practiced pulmonary/intensive care medicine for more than 20 years before becoming a financial planner. The ideas expressed in this column are his alone and do not represent the views of Medical Economics. If you have a comment or a topic you would like to see covered here, email

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