Annuities can be traced back to the Roman Empire where citizens were offered the option of making a one-time premium payment in order to receive an annual stipend for the rest of their life. It is wise to invest in your future in order to make it secure and free of worries. The retirement years are also referred to as the golden years and investment in annuities truly make them golden. In today’s world an annuity is a financial product offered by insurance companies, wherein the investors pays a premium and in return are promised a guaranteed rate of interest on the principal. There are many types of annuities that cater to the demands of virtually all investors. It is this versatility and flexibility of annuities that draws investors towards them. Annuities may be immediate or deferred. While immediate annuities begin making income payments as soon as the premium is paid, deferred annuities allow the investor to postpone receiving income payments from the annuity.

There are two types of deferred annuities, fixed deferred annuity and variable deferred annuity. Fixed deferred annuity offers a fixed rate of interest on the principal that is invested for a pre-determined amount of time. Variable deferred annuities get higher interest based on the performance of the stock market. The fixed deferred annuity is a low risk investment that assures the investor of the rate of interest and the amount of money that shall be received at the end of the term. On the other hand the variable deferred annuity is more risky but may provide better returns.

The advantages of deferred annuities are many and these include the tax benefits that are associated with such an investment. The interest gained on the deferred annuity is not taxed until the investor is ready to withdraw money from the annuity or begins to receive income payments from it. The invested money grows at a better rate than it would in traditional investments such as CDs. Thus the longer the payments from the annuity are deferred the better. The investment benefits from the compound interest offered by the annuity.

Advantages of Deferred Annuities

Deferred annuities are an excellent investment option if the investor is looking to make long-term investments and wishes to gain from the tax benefits that the annuity carries.