Deferred Payment Annuity

AAA

DEFINITION of 'Deferred Payment Annuity'

An annuity where the payments received will start some time in the future, as opposed to starting when the annuity is initiated. An annuity is a financial contract that allows the buyer to make a lump-sum payment, or a series of payments, in exchange for receiving future periodic disbursements. A deferred payment annuity allows the investment to grow both by contributions and interest before payments start coming back. Also known as a deferred annuity.

INVESTOPEDIA EXPLAINS 'Deferred Payment Annuity'

Deferred payment annuities typically offer tax-deferred growth at a fixed or variable rate of return, just like regular annuities. Often deferred payment annuities are purchased for under-age children, with the benefit payments postponed until they reach a certain age. Deferred payment annuities can be helpful in retirement planning.

VIDEO

Loading the player...
RELATED TERMS
  1. Annuity

    A financial product that pays out a fixed stream of payments ...
  2. Fixed Annuity

    An insurance contract in which the insurance company makes fixed ...
  3. Immediate Payment Annuity

    An annuity contract that is purchased with a single lump-sum ...
  4. Annuity Contract

    The written agreement between an insurance company and a customer ...
  5. Variable Annuity

    An insurance contract in which, at the end of the accumulation ...
  6. Ordinary Annuity

    A series of equal payments made at the end of each period over ...
RELATED FAQS
  1. When would a vendor care about its accounts payable turnover ratio?

    Vendors can act as suppliers or manufacturers, so they must pay attention to accounts payable and accounts receivable. An ... Read Full Answer >>
  2. What are some examples of debit notes in business-to-business transactions?

    Debit notes are a form of proof that one business has created a legitimate debit entry in the course of dealing with another ... Read Full Answer >>
  3. What types of assets may be considered off balance sheet (OBS)?

    Though the off-balance-sheet accounting method can be used in a number of scenarios, this accounting practice is especially ... Read Full Answer >>
  4. How is abatement cost accounted for on financial statements?

    Abatement costs are accounted for on a company's financial statements through increases in either cost of goods sold or operational ... Read Full Answer >>
  5. What is prime cost in managerial accounting?

    In managerial accounting, prime cost is the sum of direct costs needed to make a product and includes direct materials, direct ... Read Full Answer >>
  6. What is the difference between shareholder equity and net tangible assets?

    Shareholders' equity and net tangible assets are listed in a company's balance sheet and respectively express the company's ... Read Full Answer >>
Related Articles
  1. Home & Auto

    Watch Your Back In The Annuity Game

    Find out how to get the upper hand when dealing with this payout challenge.
  2. Retirement

    Guaranteed Retirement Income In Any Market

    By laddering annuities, you can be sure you'll have income no matter what the market does.
  3. Home & Auto

    An Overview Of Annuities

    These contracts provide a guaranteed income stream. Learn how they work and their benefits.
  4. Retirement

    Annuities: How To Find The Right One For You

    Fixed, variable and indexed annuities offer different features. Find out which one fits your needs.
  5. Options & Futures

    Break Out Of Annuity Prison

    Annuities offer security but also lock up your cash. The secondary market could be your key.
  6. Professionals

    Tips for Protecting Clients from Scammers

    Predators now have more access to vulnerable clients than ever before; advisors should communicate with clients to better spot potential scams.
  7. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  8. Credit & Loans

    What is a Syndicated Loan?

    A syndicated loan is one that involves a group of lenders (called the syndicate) who pool their lending resources to make a loan.
  9. Investing

    Two Heads Are Better Than One In Finances

    Given the importance of a retirement account, having professional help with savings accounts is far more important than a personal chef or chauffer.
  10. Taxes

    Understanding Write-Offs

    Write-off has different meanings depending on the context in which it is used, but generally refers to a reduction in value due to expense or loss.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!