An annuity that does not immediately begin generating payments is referred to as a "deferred annuity." The majority of individuals that invest in delayed annuities either:

Make gradual deposits into the account (maybe on a monthly basis), or make regular deposits into the account.

They should just leave their money in the account (with the hope that it will grow over time)

When you hear the phrase "delayed," it signifies that you are agreeing to postpone, or put off, receiving payments under the contract. Compare and contrast an instant annuity with a delayed annuity: After you have purchased and funded an instant annuity, you will start receiving payments practically as soon as you make the purchase.

If you have already begun receiving payments from an instant annuity, it will be very difficult, if not impossible, for you to reverse the process and receive your original investment.

To put it another way, if you choose a delayed annuity, you will have to wait, perhaps for the rest of your life, to start receiving payments from the contract (whether you opt for lifetime payments or some other arrangement).

Important information may be found at the bottom of this page; be sure to read it.

Defer Forever?

If you choose to invest in a delayed annuity, you are exempt from the need that the money be converted into a steady flow of income at any point in the future. You have the option, rather, of taking withdrawals just when they are required, taking the whole amount in a single lump payment, or transferring the assets to a new annuity or account. Instead of giving everything over to the insurance company in an irrevocable manner, a delayed annuity gives you the opportunity to maintain control over the money and keep your alternatives open.

When put into practice in this manner, a delayed annuity is essentially an account that happens to contain some of the characteristics of an annuity. These qualities include certain tax characteristics, and maybe certain guarantees offered by an insurance provider (including the possibility of a death benefit).


annuity is a series of payments, and historically, they've been used to give a steady income for life (for retirees, for example). In the event that you ultimately want to convert your policy into an annuity, the insurance provider will provide you with a number of payment choices to choose from. For instance, you may decide that you want the income to be paid out exclusively during your lifetime, or you can decide that you want the income to continue for the length of either your lifetime or the lifetime of your spouse.

Tax Deferral

Avoid getting the delay of payments from a deferred annuity confused with the tax deferral that is offered by annuities; this is another benefit offered by annuities. You don't have to pay taxes on the income generated by the annuity each year when it's deposited to the account thanks to the tax deferral provision. Instead, you will have to pay taxes on the gains that you take out of a tax-deferred account. In an ideal scenario, this enables you to take advantage of the phenomenon known as compounding, in which you retain more money in the contract, reinvest your gains, and earn more on top of those earnings.

Both the notion of tax deferral and the idea of a delayed annuity have something in common: in both circumstances, you are putting things off until a later time (whether it is when you get income from an annuity or when you pay your taxes).

Essential Facts and Information

Before you do anything further, you should discuss the use of annuities as well as any withdrawals or transfers with a tax professional or certified public accountant (CPA). This article is merely a basic definition, and it will not be adequate to help you grasp more sophisticated insurance products (and even more complex tax laws). It is possible to lose money, and it is recommended that you discuss the specifics of this possibility with a locally registered insurance agent who can provide you with further information in this regard.