Deferred Annuity

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DEFINITION of 'Deferred Annuity'

A type of annuity contract that delays payments of income, installments or a lump sum until the investor elects to receive them. This type of annuity has two main phases, the savings phase in which you invest money into the account, and the income phase in which the plan is converted into an annuity and payments are received.

A deferred annuity can be either variable or fixed.

BREAKING DOWN 'Deferred Annuity'

Earnings on a deferred annuity account are taxed only upon withdrawal, providing the annuity with a tax benefit. This type of annuity also provides a death benefit, so that the beneficiary of the annuity is guaranteed the principal and the investment earnings.

For example, an investor may choose to defer annuity payments until she retires.

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RELATED FAQS
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    With uncertainty about the sustainability of Social Security benefits for future retirees, a lot of responsibility for saving ... Read Full Answer >>
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