The Difference Between Immediate and Deferred Annuities

Immediate Annuities: The Lifetime Guaranteed Option

If you’re ready to start receiving steady income now and have a sum of money available (think an inheritance or Individual Retirement Account [IRA] rollover), an immediate annuity may be a good option. Simply put, you’ll be converting existing assets into monthly payments to ensure steady cash flow for now, and in the future.


  • Income payout options – like recurring payments over a fixed term, or until you die.
  • Payments begin right away.
  • Possible death benefit paid out to the people and causes of your choosing.

What to be aware of:

  • Since you start receiving payments immediately, there is no accumulation phase and therefore less potential for growth.

Deferred Annuities: The Tax-Deferred Option

Since deferred annuities aren’t returned to you in the form of steady retirement income for some time, they have potential for growth during the accumulation phase. If you value tax efficiency and want to choose when you start taking money out, deferred annuities might be a good option.


  • No income tax payments until you’re ready to take money out.
  • Potential for your principal to grow before you start receiving payments.
  • No annual contribution limits (unlike IRAs and 401[k]s).

What to be aware of:

  • You won’t get to enjoy the steady income it provides until an agreed-upon future date.

The Difference Between Fixed and Variable Rates

Fixed Annuities: The Lower-Risk Option

With this option, your premiums earn interest at a minimum guaranteed rate or higher. Because of this, you can have better insight into the income you’ll receive in retirement.


  • Generally, not affected by market volatility.
  • Principal protection and competitive interest rates.

What to be aware of:

  • The value of the annuity may not keep pace with inflation, given the set interest rates.

Deferred Variable Annuity Resources

Variable Annuities: The Highest Upside Option

Variable annuity returns are based on market performance and can be key to your accumulation strategy. This option allows you to build (and potentially grow) your retirement funds. Through market investments made along the way, you’ll receive guaranteed monthly income when you retire.


  • Acts as an investment account that allows you to accumulate funds on a tax-deferred basis.
  • Funds are invested in variable subaccounts and therefore may keep up with – or outpace – inflation.
  • Pays out a designated portion of your lifetime payment, despite market volatility, with a guaranteed lifetime withdrawal benefit rider (available at an additional cost).

What to be aware of:

  • Investments are dependent on market risk and performance and could lose principal.