In simplistic terms, an immediate annuity works by turning retirement savings over to an insurance company on the promise that it will pay a monthly retirement income for the rest of your life. The amount of income this will generate varies on age, sex, marital status and the type of annuity purchased. Immediate annuities usually provide a higher initial retirement paycheck than managed payouts or depending only on interest and dividends. However, the tradeoff is that you generally hand over control of your savings to the insurance company. A joint and survivor annuity can continue the flow of income to a spouse or partner after your death, but annuities do not leave any money left for a legacy.

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