Deferred Annuity

A deferred annuity is an insurance contract in which premium contributions accumulate on a tax-deferred basis during an accumulation phase, with income payments beginning at a future date — typically at retirement. In contrast to an immediate annuity, which begins payments almost immediately, a deferred annuity allows the account value to grow before distributions commence. Types include fixed deferred (guaranteed interest rate), variable deferred (market-linked sub-accounts), and fixed-indexed deferred (linked to an index with a floor and cap). Surrender charges apply if funds are withdrawn during the early years. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance carrier.