Annuities
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What types of annuities are there?
There are four basic types of annuities: deferred variable annuities, deferred fixed annuities, immediate
variable annuities, and immediate fixed annuities. And sometimes an annuity can start out as one type and
become another. Confused? Here's what the terms mean:
- Deferred
A deferred annuity has two phases: an accumulation phase, when the assets in the annuity are invested
for growth, and a distribution (payout) phase, when the annuity starts paying income. It's called
deferred because after you open and fund the annuity, the payout phase is deferred, often for many
years. You generally purchase a deferred annuity by making a series of regular investments over time,
often many years, though you may also fund it with a single lump sum purchase.
- Immediate
With an immediate annuity — also called an income annuity — you invest a single lump sum of money and
the annuity starts distributing the money in the form of an income stream shortly after the annuity is
opened. Payout generally starts in about a month, but never longer than a year after the annuity
contract is issued.
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