Deferred Annuity

Deferred Annuity

A type of annuity contract that delays payments of income, installments or a lump sum until the investor elects to receive them. This type of annuity has two main phases, the savings phase in which you invest money into the account, and the income phase in which the plan is converted into an annuity and payments are received.

A deferred annuity can either be variable or fixed.

Investopedia Commentary

Earnings on a deferred annuity account are taxed only upon withdrawal providing the annuity with a tax benefit. This type of annuity also provides a death benefit so that the beneficiary of the annuity are guaranteed the principal and the investment earnings.

For example, an investor may choose to defer annuity payments until they retire.

Related Links

Anything But Ordinary: Calculating The Present And Future Value Of Annuities
Passing the Buck: The Hidden Costs of Annuities
Getting the Whole Story on Variable Annuities

See also: Annuitant, Annuity, Annuity Contract, Beneficiary, Death Benefit, Fixed Annuity, Variable Annuity

deferred annuity

An annuity that is not scheduled to begin payments until a given date. These annuities may be purchased with a single payment or, as is more often the case, with a series of periodic payments. Deferred annuities are most commonly purchased by individuals who want to make periodic payments during their working lives in order to receive monthly or annual income payments from the annuities during their retirement. Compare immediate annuity. See also periodic purchase deferred contract, single-premium deferred annuity.