Annuities are an excellent investment option that can help create a savings and retirement plan. The primary advantage of investing one’s savings in annuities is the versatility and flexibility that they offer. Immediate annuities provide the investor income virtually as soon as the investment is made. Deferred annuities, on the other hand, allow the investor to save in a manner that the investment compounds and grows over the years until the investor is ready to receive income payments from it or withdraw from it. A comparison between immediate annuities and deferred annuities in essence means to compare the needs and financial requirements of different investors as both types of annuities offer entirely different terms and conditions to the investors. Thus, whether one should invest in immediate annuities or in deferred annuities all depends on what you expect of your investment.
Immediate Annuities
- Immediate annuities are ideal for investors who wish to receive a regular income from the investment soon after it is made. Thus it is perfect for those who are about to retire and hadn’t invested in a retirement plan earlier. It is also useful for those who wish to invest a large sum of money and receive money from it regularly and supplement their income.
- Income from immediate annuities can be received for a fixed period of time such as for 10 to 15 years or for the rest of the investor’s lifetime.
- Income can be received on a monthly, quarterly, half-yearly or yearly basis as is suitable for the investor.
- The rate of interest on immediate annuities is far better than received when the money is in a savings account.
- The immediate annuity is an excellent investment option for conservative investors who wish to receive money from their investment and don’t wish to wait.
Deferred Annuities
- Deferred annuities are meant for investors who do not want to receive income from the investment or withdraw from it for quite a long time. This delay guarantees better returns as the interest compounds and the benefits of the tax deferral are the maximum.
- Due to the tax benefits associated with deferred annuities the investment is taxed only when income payments are received from it or when money is withdrawn. Thus the person will pay tax only after many years, and then too in all probability he or she will be close to retirement or already retired and will thus be taxed accordingly.
- Deferred annuities can be bought with a one-time payment or by regular payments towards the annuity.
- The rate of interest offered by deferred annuities is higher than for other long-term investment vehicles such as CDs.
Annuity Basics 
Immediate Annuities Vs. Deferred Annuities 
