Deferred annuities allow annuitants to delay their income disbursement payments. Delaying the annuitization phase allows annuity owners to contribute more to their investment over time.
An annuity is a reliable financial tool many use to secure their financial future. Many people looking to invest in their retirement use annuities because of the myriad of benefits they provide, such as tax-deferred growth and an additional revenue stream beyond Social Security.
There are two main types of annuities — deferred and immediate. Unlike immediate annuity contracts that disburse income payments immediately after purchase, deferred annuities delay income payments. This delay allows annuitants to gradually contribute to their accounts. It also allows for their investment to grow over time and benefit from compounding interest.
How Do Deferred Annuities Work?
Fixed Deferred Annuity vs. Variable Deferred Annuity
Deferred Annuity Pros and Cons
Risk of Loss
Selling Your Deferred Annuity
Though investing in a deferred annuity can be a profitable decision, it is also a long-term one and doesn’t account for change in circumstance over time. In the face of debt, college tuition or emergency home renovations, selling some or all of your deferred annuity for cash may be the most beneficial scenario for you.
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- Lankford, K. (2013, August). Deferred Income Annuities Offer Predictability. Retrieved from http://www.kiplinger.com/article/retirement/T003-C000-S004-deferred-income-annuities-offer-predictability.html
- Pritchard, J. (2016, February). Deferred Annuity – Definition of a Deferred Annuity. Retrieved from https://www.thebalance.com/definition-of-deferred-annuity-315094
- Steiner, S. (2016, December 7). 5 pros and cons of investing in annuities. Retrieved from http://www.bankrate.com/retirement/5-pros-and-cons-of-investing-in-annuities/