When does an immediate annuity start making payouts?

An immediate annuity begins making payouts as soon as it is purchased. This financial product is designed to provide a stream of income almost immediately, often starting within a month or at the end of a specified payment interval, depending on the contract terms. The fundamental characteristic of an immediate annuity is that it is meant for individuals who require immediate income, such as retirees, allowing them to receive regular payments for a specified period or for the rest of their lives right after their initial investment.

The concept of an immediate annuity contrasts sharply with other types of annuities, such as deferred annuities, which accumulate value over time before beginning payouts. Understanding this distinction helps clarify the functionality and purpose of immediate annuities in retirement planning and financial management.