Deferred Payment Annuity

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.



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