Deferred Payment Annuity

Loading the player...

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.

BREAKING DOWN '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.

RELATED TERMS
  1. Deferred Annuity

    A type of annuity contract that delays payments of income, installments ...
  2. Valuation Period

    The time between the end of the business day of the first business ...
  3. Annuity

    A financial product that pays out a fixed stream of payments ...
  4. Annuity In Advance

    An amount of money that is regularly paid at the beginning of ...
  5. Split-Funded Annuity

    A type of annuity that uses a portion of the principal to fund ...
  6. Annuity In Arrears

    An annuity that has periodic payments of either interest and/or ...
Related Articles
  1. Retirement

    Are Annuities Retirement-Only Investments?

    Learn more about why annuities are generally purchased and the way that they can positively and negatively affect an individual preparing for retirement.
  2. Retirement

    How a Fixed Annuity Works After Retirement

    These popular investments can provide a steady stream of income during your retirement years. Here are the details.
  3. Investing

    Advising FAs: Explaining Annuities to a Client

    Conceptually speaking, annuities can be thought of as a reverse form of life insurance.
  4. Investing Basics

    DIY Annuities: What You Need to Know

    Annuities are attractive because they can give you a stream of income, but they can be tricky to buy.
  5. Retirement

    Why Are Annuities Important for Retirement?

    Understand how annuities work, and identify the benefits they provide for retirement, the most salient being a guaranteed income stream for life.
  6. Retirement

    Who Benefits From Retirement Annuities

    Annuities guarantee some degree of fixed income in retirement. But is the security worth the fees and less favorable tax treatment? How to decide.
  7. Retirement

    What Role Should Annuities Play in Retirement?

    Fixed annuities can provide income protection for those worried about outliving their assets. But don't buy a bigger policy than you really need.
  8. Retirement

    How Are Variable Annuities Taxed?

    Before investing in a variable annuity, discuss your personal financial picture with a knowledgeable financial advisor.
  9. Retirement

    Annuities Vs. Bonds: Which One Is Better For You?

    Compare the important features of annuities and bonds, and understand which investment vehicle is the better choice based on retirement goals.
  10. Options & Futures

    Break Out Of Annuity Prison

    Annuities offer security but also lock up your cash. The secondary market could be your key.
RELATED FAQS
  1. For what types of financial instruments would I want to calculate the present value ...

    Learn about the types of financial instruments the present value of an annuity calculation is most useful for, including ... Read Answer >>
  2. What are the main kinds of annuities?

    Learn about the four basic types of annuities, and why the different investment and payout options are suitable for different ... Read Answer >>
  3. What are the risks of annuities in a recession?

    Distinguish between the most common types of annuities, and understand which types of annuities pose the most risk during ... Read Answer >>
  4. What are the best ways to sell an annuity?

    Learn about the best ways to sell annuities. Annuities are financial products that provide income on a regular basis to their ... Read Answer >>
  5. What is the difference between a fixed and variable annuity?

    Understand the difference between fixed, variable and indexed annuities, and read a brief summary of their respective risks ... Read Answer >>
  6. Are variable annuities a good retirement investment?

    Discover the basics of variable annuities, the positive and negative aspects associated with them, and who is best suited ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center