What is considered to be a characteristic of an immediate annuity?

An immediate annuity is designed to provide income shortly after the initial investment is made. The characteristic that defines it is that benefit payments commence within one payment period of the purchase. This means that once the individual has made their purchase, they will begin receiving annuity payments almost immediately, often as soon as the end of the month or quarter in which the purchase occurs.

This immediacy makes immediate annuities particularly appealing for retirees or individuals looking to ensure a reliable income stream shortly after they invest. The requirement for payment commencement within a brief time frame differentiates immediate annuities from deferred annuities, which typically have a waiting period before benefits are paid out.

The other options do not accurately represent the key feature of an immediate annuity. For instance, starting benefit payments within five years describes a deferred annuity, while characteristics related to equity or stock indices pertain to variable annuities. Periodical contributions being immediately is more indicative of a flexible premium arrangement rather than the nature of an immediate annuity. Thus, the specific timing of payments is what distinctly defines this type of annuity.