Deferred Annuity
An annuity that grows during an accumulation phase before income payments begin later.
A deferred annuity has two phases: an accumulation phase, when the contract value grows tax-deferred, and a later payout phase, when it can provide income. This contrasts with an immediate annuity, which begins paying right away.
Deferred annuities can be fixed or fixed-indexed. Growth and any guarantees depend on the claims-paying ability of the issuing insurance company and are not FDIC insured, and early withdrawals may trigger surrender charges.
Example
A 58-year-old buys a deferred fixed-indexed annuity now, lets it grow for several years, and turns on income at 67 to coordinate with retirement.
This definition is for general educational purposes only and is not financial, tax, or legal advice. Tim Hartle is an independent insurance professional. Annuity guarantees are subject to the claims-paying ability of the issuing insurance company and are not FDIC insured. Rules and product features vary by situation and by state. Please consult a qualified advisor about your own circumstances.
Related Terms
Immediate Annuity
An annuity purchased with a lump sum that begins paying income almost right away.
Tax Deferral
Postponing taxes on growth until money is withdrawn, allowing earnings to compound in the meantime.
Surrender Charge
A fee for withdrawing more than the allowed amount from an annuity during its early years.
Income Rider
An optional annuity feature that provides lifetime withdrawals without giving up access to the contract value.
Go Deeper
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Annuities are insurance contracts. Guarantees, including guaranteed lifetime income benefits where available, are subject to the claims-paying ability of the issuing insurance company. Product features, fees, withdrawal restrictions, and surrender charges vary by contract.