Deferred Annuities Explained
Deferred annuities mean that you are purchasing a contract and deferring income, payments or profits. Consequently, this is before you choose to do something with it. This may involve a stream of payments at a later date. Most noteworthy, most fixed and index annuities are deferred annuities.
A deferred annuity is a type of annuity contract that delays payments of income, installments, or a lump sum until the investor elects to receive them and the contract is out of surrender. This type of annuity has two main phases: the savings phase also called the accumulation phase. These can include Fixed Annuities and Index Annuities. The second phase is usually the income phase, if you want this or if you have purchased a rider. Deferred annuities are variable annuity, index annuity or fixed annuity.
A Flexible Premium vs. A Single Premium
Flexible premium annuities allow for multiple purchase payments, sometime this extents the term of the contract but the carriers we deal with will not extend the term of the index annuity. An example of this is if you purchased a 7 year index annuity and wanted to add money to it in 2 years, you would only have 5 years left for all the money, even the new money to be out of surrender. While a single premium annuity requires one lump-sum purchase payment.
Purchase these with one lump-sum premium payment such as, 401(k) or IRA rollover. Some single-premium annuities do accept additional premiums during a short, specified time period at the beginning of the contract.