Deferred Annuities

What is a deferred annuity?
A deferred annuity is an insurance product designed to provide income at some time in the future - typically during retirement. The idea is to let the premium payment you made to the insurance company accumulate tax-deferred for a number of years.
 
If you choose a fixed, deferred annuity, your money will accumulate at a fixed rate guaranteed* by the insurance company for a specified period of time.  If you choose a variable, deferred annuity, your money will accumulate at a variable rate, based upon the performance of the underlying investments. The investment return and the value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
 
When you no longer wish to keep accumulating funds in your annuity, you may take the money out as a lump sum or annuitize it (convert it to income payments). If you annuitize, you have a choice of several standard pay-out options. Liquidations of earnings are subject to ordinary income tax and, if taken prior to age 59 1/2, a 10% federal income tax penalty may also apply.

* Guarantees are based on the claims-paying ability of the insurer.