Deferred annuities allow you the opportunity to deposit a lump sum in a financial institution...like a bank or a life insurance company...with the expectation of receiving payments at a future date.
Sometimes the principal is accumulated over a period of time then is distributed at a prearranged date.
These annuities...like all other annuities...are used to provide income at retirement though they are not so restricted.
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They also provide a minimal death benefit even though they are not life insurance policies. The death benefit is guaranteed and is usually more than the amount you contributed to your annuity. There are two types.
These annuities provide a guaranteed interest rate for a fixed period of time and accumulates on a tax deferred basis.
When payment is received you are required to pay income taxes. The rate is usually lower at that time as this is often used for retirement income and your total income at that point is more often than not lower than when you were working.
These plans offer flexible investment options. You have the choice of stocks, bonds and money market plans in which to invest. Your returns on your investment are usually much more than that derived from fixed annuities but there is no guarantee of this.
You may move your money from one investment to another without penalty. Your contributions to the plan can be in one lump sum or can be accumulated over a period of time.
Accumulation of earnings are free of income tax until payment is received by you. A death benefit is payable if the owner dies during the accumulation period.
Variable annuities are offered only by prospectus and the agent must have an N.A.S.D license. Read the prospectus carefully before you invest.
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