What are deferred annuities?
With a deferred annuity you pay a premium to the insurance company which issues a contract promising to pay interest or gains made on the deposit while deferring the income and the taxes until you actually withdraw the money or begin receiving an income. There are three major types of deferred annuities: (1) Fixed Deferred annuities; (2) Equity-Indexed annuities and (3) Variable Annuities • Explain fixed deferred annuities. A Fixed Deferred Annuity is a contract between you and the insurance company which pays a guaranteed current interest rate. The interest rate may be guaranteed for one or more years and earns compound interest. The interest earnings compound on a tax-deferred basis. Fixed deferred annuities are offered either on a single premium basis, i.e., you give the insurance company a lump sum premium payment, (typically $5,000 or more); or on a flexible premium basis, i.e., you pay a lower re-occurring premium payment on a monthly, quarterly, or annual basis. In addition to t
