What Do You Mean by Deferred Annuity

Learn about the benefits of deferred annuity and how it can provide guaranteed income in retirement. Explore different types and examples of deferred annuities.

Understanding Deferred Annuity

Deferred annuity is a financial product that provides a series of payments over a specified period after an initial investment or multiple contributions. Here’s a detailed overview of what deferred annuity entails:

How Does Deferred Annuity Work?

When you invest in a deferred annuity, you make a lump sum payment or regular contributions to the annuity provider. In return, the provider promises to pay you a regular stream of income at a future date or for a specified period.

Types of Deferred Annuities

  • Fixed Deferred Annuity
  • Variable Deferred Annuity
  • Indexed Deferred Annuity

Benefits of Deferred Annuity

  • Guaranteed income in retirement
  • Tax-deferred growth
  • Flexible payment options

Case Study: John’s Deferred Annuity

John invested $100,000 in a fixed deferred annuity at age 55. The annuity promised to pay him $500 per month for 20 years starting at age 65. John received $120,000 over the 20-year period, earning a 20% return on his investment.

Statistics on Deferred Annuities

According to a recent study, 45% of Americans have no retirement savings, making deferred annuities a popular choice for retirement planning.

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