An annuity of any kind is, simply put, a retirement savings plan. Its goal is to provide you with a stable flow of income after you retire. Unlike an immediate annuity, which is usually created with a single lump sum investment and starts paying out almost immediately after that point, a deferred annuity has two distinct parts – the saving and investment stage, followed by the payout stage.

Both immediate and deferred annuities come in two varieties: fixed and variable. The fixed annuities provide greater security, since the interest rate is guaranteed by the insurer, and will remain the same even if the market in which your money was invested underpreforms. The variable annuities have the potential for greater return, should the investments do better than predicted. The latter type carries an added risk, since you will lose money if the investments fail to deliver the expected growth rate. A third choice that is worth considering is the creation of a part-fixed, part-variable annuity. This approach would provide you a guaranteed monthly income while retaining the potential for greater growth.

A major benefit of the deferred annuity is its tax-deferred status. Any money you invest in the annuity during the investment phase is not taxed, which allows the investment to grow at a much faster rate. Annuity payments, however, are subject to regular income tax. You should be aware that if you begin withdrawing money fom the annuity before you are 59 ½ years old, that money will generally be subject to an additional 10% federal tax penalty.

Frequently, a variable deferred annuity will also include a guaranteed death benefit. The death benefit guarantees that your beneficiaries will never receive less than the original amount you had saved in the savings phase, minus the payments you'd already collected. Of course, with variable annuities there is also the possibility that the amount might keep increasing. Many insurance companies offer death benefits that may increase over time, depending on how the investment performs.

The main benefits of purchasing an annuity are security, stability, and savings, both in time and money. Once you have completed the savings phase of the deferred annuity, your future income is guaranteed, whether for the period you had agreed to or – and this is the true appeal of the annuity as a retirement savings vehicle – for as long as you live. You no longer need to spend time managing your savings, nor are you subject to various brokerage and transaction charges that are so common with other types of investments. In addition, your annuity is guaranteed by the insurer's capital, which keeps it safe from market fluctuations, natural disasters, or pretty much any other worry you might imagine. With the right annuity, you will not have to worry about your retirement funds ever again.

Deferred annuities are very flexible, making it very likely there exists one that will fit your particular situation. Our expert insurance brokers can help you select the annuity that will best serve your financial goals.

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