"A Deferred Annuity falls under a category of annuities rather than a type of annuity"
A deferred annuity is a contract with an insurance company that promises to pay the owner a regular income, or a lump sum, at some future date.
Investors often use deferred annuities to supplement their other retirement income, such as Social Security.
The period when the investor is paying into the annuity is known as the accumulation phase (or savings phase). Once the investor elects to start receiving income, the payout phase (or income phase) begins.
Many deferred annuities are structured to provide income for the rest of the owner’s life and sometimes for their spouse’s life as well. All deferred annuities grow on a tax-deferred basis.
Owners of these insurance contracts pay taxes only when they make withdrawals, take a lump sum, or begin receiving income from the account. At that point, the money they receive is taxed at their ordinary income tax rate. There are three basic types of deferred annuities:
Fixed Annuities promise a specific, guaranteed rate of return on the money in the account.
fixed INDEXED ANNUITIES
Indexed Annuities provide a return that is based on the performance of a particular market index, such as the S&P 500.
The return on Variable Annuities is based on the performance of a portfolio of mutual funds, or sub-accounts, chosen by the annuity owner.
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