If you are close to or are already in retirement; the likelihood is that you would like to generate a tax free income to keep you going. Buying into an immediate annuity can be your best friend during this time because it begins to pay you returns immediately. First of all, you should understand that an annuity is not an insurance policy. It is not a savings account or nothing of the sort. An annuity is basically just a contract that you make with an insurance company wherein they agree to pay you certain installments from the money that you have invested in life insurance. This income that they pay you from your own investment is also tax free. Annuities are preferred for this reason and because it is money that will be paid for as long as you live. Immediate annuities are paid by the insurance company no later than one year after your premiums are paid. You generally pay for this type of annuity in one payment. If I were to explain it in an easier way; when you pay for a life insurance premium all at once, that money is then given to you as income over the time that you remain alive. This is a common choice among those who are looking to retire soon or who already have. It is the best way to ensure that you will be taken care of for the rest of your life. It is a perfect choice for those who are not so certain. When you are thinking of buying into an immediate annuity, it is always necessary to think first of the type of lifestyle that you are hoping to live during your retirement. A lot of people will begin to invest in their annuities while only in their middle ages and opt for monthly payment plans that will accommodate a more relaxed retirement. It is a good choice if you are not quite ready to retire right now. This is also a thought if you are looking to get into an early retirement. There are of course certain things that you must think of before you begin to invest in any type of annuity and these things are: How long you plan on paying your premiums How high the rates are How long you plan to provide for yourself What type of lifestyle you want to live How your current health status is. It may not make any sense to some people, however, you have to consider your health as well because if you are very ill and want to invest in annuities, it seems almost odd because the money invested in them might only last for 1 year and the rest is simply not applicable. You should also try to stick to your agreement so that you do not have to sell your annuity because if you do you could end up taking a huge loss for it, even if you sell it on a partial or shared payment plan. When you are ready to dive into the annuities game, let me tell you that it could be the best thing that you ever did for yourself because in the end, if you only have a certain amount of money to work with isn't it better to have an experienced professional helping you live the rest of your life on it tax free, rather than trying to figure it out for yourself?