How Do Deferred Annuities Work?

Deferred annuities are a type of investment that many people choose when saving for retirement. Here are the basics of deferred annuities.

Deferred Annuities

A deferred annuity allows you to postpone receiving payments until a later date. This type of contract is set up through an insurance provider. You will pay the insurance company a regular premium or a lump sum to purchase the annuity. Then when you are ready to start receiving payments once you are retired, you will let the insurance company know.

Features

This type of investment has a tax benefit for investors. The money that is earned on investments from the funds in the annuity will not be taxed until you start withdrawing it. This allows you to grow your retirement funds faster than you ordinarily would be able to.

This type of annuity will provide you with a guaranteed amount of income for the rest of your life. Many people prefer this stability during their retirement years.

Investment Considerations

When you choose to invest in a deferred annuity, you will want to make sure that you choose a company that is strong financially. If the company were to go out of business, you would potentially lose all of your retirement savings.

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