Immediate Annuities vs. Deferred Payout Annuities

If the specified date for payouts to begin is within one year of the date the contract is established (i.e., a single cash payment is made and the insurance company begins a systematic liquidation of the payment back to the owner within one year), the annuity is called an immediate annuity.

If, alternatively, the specified date for payouts to begin is later than one year, the annuity is called a deferred annuity because deposits are made now, but the payout is deferred. An immediate annuity only has a payout phase; a deferred annuity has both an accumulation and a payout phase.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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