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An immediate annuity is an investment policy usually purchased from an insurance company. Immediate Annuities are sometimes known as Single Premium Immediate Annuities. Immediate annuities are commonly purchased with a lump sum and used as a retirement investment. In an immediate annuity, the investor begins to receive lump sum pay-outs anywhere from immediately to one year from the date of purchase. Generally, payments begin one month after investing in the annuity.

There are several pay-out methods available when you begin receiving annuity payments. With some options, you or your beneficiaries can select how you want to be paid. The following are some of these:

Performance will vary. Fund performance often falls off and risk levels rise during the subsequent three years after a fund is given an initial five-star Morningstar rating, suggests another recent study by Matthew Morey, a professor at Pace University. One reason for this is that after receiving a five-star rating the size of the fund grows dramatically, which then makes the fund unwieldy to manage, he suggests. Since Morey's study was completed, Morningstar also has changed the way it doles out top rankings to make them more precise. One of the biggest problems with all rating systems is that they are not necessarily predictive in nature. This means they're not really set up to tell you whether certain funds will necessarily do better in the future. For the most part, the ratings indicate how much you might have made and how much aggravation you faced in the process.