deferred annuity (redirected from Deferred-Payment Annuity)
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in which the annuitant
does not begin to receive payments
until some future date. A deferred annuity has two phases: a savings
phase and an income
phase. During the savings phase, the annuitant places money
into the annuity, which invests
it on behalf of the annuitant. In the income phase, the annuitant receives payments. It is important to note that a deferred annuity is not taxed until the income phase begins. It also pays a death benefit
to the survivor(s) of the annuitant. Nearly all retirement plans are deferred annuities. See also: IRA
An annuity that is not scheduled to begin payments until a given date. These annuities may be purchased with a single payment or, as is more often the case, with a series of periodic payments. Deferred annuities are most commonly purchased by individuals who want to make periodic payments during their working lives in order to receive monthly or annual income payments from the annuities during their retirement. Compare immediate annuity
. See also periodic purchase deferred contract
, single-premium deferred annuity
A deferred annuity contract allows you to accumulate tax-deferred earnings during the term of the contract and sometimes add assets to your contract over time. In contrast, an immediate annuity starts paying you income right after you buy.
Your deferred annuity earnings can be either fixed or variable, depending on the way your money is invested.
Deferred annuities are designed primarily as retirement savings accounts, so you may owe a penalty if you withdraw principal, earnings, or both before you reach age 59 1/2.