What is a Deferred Annuity?
A deferred annuity is a type of personal account intended for long-term savings goals, like retirement. Unlike an immediate annuity, income payments are optional and are deferred until a future time. Deferred annuities have two phases: the savings and investment phase, where your earnings accumulate tax-deferred, and the income phase, where you can receive regular payments for your lifetime or another period. Deferred annuities typically allow withdrawals during the savings and investment (or accumulation) phase, and entering into the income phase is typically optional. Early withdrawal charges and ordinary income taxes apply at withdrawal, and tax penalties for withdrawals before age 59½ may apply (see How are withdrawals from a deferred annuity taxed?) There are two types of deferred annuity: fixed and variable. Top What is a deferred income annuity? A deferred income annuity is a type of deferred annuity whose features are designed to help maximize your future income. It’s sometimes
A. A deferred annuity is a contract issued by an insurance company that allows you to accumulate money on a tax deferred basis for long term goals like retirement. Unlike an IRA or company sponsored plan, there are virtually no limits on contributions to a deferred annuity. There are two phases to a deferred annuity. The first is the “accumulation phase” during which your assets grow tax deferred. If you withdraw money from your annuity during the “accumulation phase” of the contract the insurance company may assess a charge to cover the cost of issuing the contract (commonly known as a withdrawal charge). You may also incur tax penalties as a result of withdrawals prior to age 59 . The second is the “payout phase” which begins when you are ready to receive income from your annuity. At that time, there are a number of options from which you can choose, according to your needs. You can withdraw your money in a lump sum, through systematic withdrawals or in a regular stream of income pay
