DEFINITION of 'Split-Funded Annuity'

A type of annuity that uses a portion of the principal to fund immediate monthly payments and then saves the remaining portion to fund a deferred annuity. The two funding methods let the annuity holder receive dependable income and simultaneously save for future needs.

BREAKING DOWN 'Split-Funded Annuity'

Using a split-funded annuity means that individuals do not have to wait for the annuity to reach the payout phase, because the stream of income begins immediately.  At the same time, the annuity's remaining balance compounds tax deferred.

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