What is a Deferred Annuity?

A deferred annuity is a stream of payments that will not begin until a later date. This arrangement usually begins with an investment phase, where funds are paid into the annuity, and an income phase where the annuity pays out funds. The arrangement may also include the application of a fixed interest rate to invested funds for a certain period of time, which assists in creating a predictable series of deferred payments.

Example of a Deferred Annuity

As an example of a deferred annuity, a retiree invests in an annuity that does not begin to make payments to the retiree until he is 65 years old. An alternative arrangement is a payout that does not begin until later, such as at age 80, by which time the retiree’s other investment funds might have run out.