An annuity is basically a contract between an individual and an insurance company; wherein the individual pays a premium and receives payment from the insurance company on the basis of the type of annuity that is chosen. Deferred annuities allow the investor to receive payment many years after the initial investment. Annuities are tax-deferred and in fact deferred annuities are the only source of income that does not attract Social Security tax at the time of repayment. One can select to make a one time premium payment and add to it later or choose to make repeated and regular premium payments towards the deferred annuity. Deferred annuities give people the choice to defer the payment from the annuity to a later date. They are meant for people who want to save in a tax-deferred manner for many years and then receive a payout once they retire. It can also be seen as a personal retirement account, into which you deposit but withdraw only after you retire. Deferred annuities are also useful to individuals who want to save money and avail the tax benefits from the annuities and decide to receive the repayment at a later date.

There are two types of deferred annuities:

Fixed Annuities

Variable Annuities

Payment Stage of the Deferred Annuities

When you finally begin to receive payment from deferred annuities you may choose to receive all the income in a lump sum, or select a regular source of income or even take up the option of guaranteed income till death.

Advantages of Deferred Annuities

Deferred annuities are a perfect option when an individual is looking for long term investments and benefits.