Fixed Annuities

Deferred Annuities vs. Immediate Annuities

With a deferred annuity, you pay one or more premiums over a period of time called the accumulation period. The premiums and interest credited thereon go into a fund called an accumulation fund. With fixed deferred annuities (not variable annuities), the contract states a minimum guaranteed interest rate at which funds accumulate during the accumulation period.

The annuity payments you will receive begin at a future point in time called the maturity date, which marks the end of the contract's accumulation period. There are several options for how you can take payments over the deferred annuity's payout period, or annuitization phase.

It is important to note that you don't pay income taxes on interest earned while the deferred annuity is in its accumulation period, unless you draw from the annuity's cash value during that time. Since taxes are deferred until the payout period, fixed deferred annuities are likely to provide the policyholder with a higher after-tax rate of return as compared to bank CDs.

With an immediate annuity, you pay a single premium and immediately start receiving payments at the end of each payment period (usually monthly or annually). The payment period could be for a defined number of years, or it may be for your lifetime. Receiving payments under an immediate annuity works similarly to taking payments over the annuitization phase of a deferred annuity.

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• Deferred Annuities vs. Immediate Annuities
• Annuity Premiums
• Options for Taking Annuity Payments (Annuitization)
• Annuity Charges and Fees
• How Fixed Annuities Can Be Used to Cover the Long Term Care Risk