Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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A variable deferred annuity is an investment that varies in its outcome and is paid regularly after the investment period is over. In its simplest terms, a variable is something that changes, deferred means put off for a certain amount of time, and annuity refers to money paid at regular intervals.

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Before deciding if this type of investment is right for you, you need to understand how they work, the benefits and the drawbacks of this type of investment. The following article will provide additional information about variable deferred annuities.

How Do Variable Deferred Annuities Work?

If you are thinking of going with a variable deferred annuity, it is important to understand how they work. The choice, actually, may not even be up to you. If you are investing in your employer’s retirement plan, the type of plan it is, is already decided for you.

Variable deferred annuity plans have two phases:

  • Savings phase or accumulation
  • Payout phase or distribution

The length of time of these two phases varies based on many different factors. Obviously, the longer the first phase, the more payout will be available in the second phase.

With this type of plan, after you pay into it for a pre-determined amount of time, you can start receiving regular payments. The investment of the money you and/or your employer has put into the annuity is where the variable comes into play. A variable deferred annuity will guarantee a certain amount of regularly scheduled payouts when you enter phase two.

However, since investment is being made into a variety of funds, stocks, and other financial options, your payout may be higher, if the investments have a higher return.

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What Are the Benefits and Risks of Variable Deferred Annuities?

Although variable deferred annuities are riskier than some other types of annuities, you still have the safety net of a guaranteed lowest payment to be paid out. The benefit is that a variety of investments can bring back higher return. A higher return means you receive more pay when you start receiving your regularly scheduled payouts from your annuity.

It would be nice to plan for and expect a certain amount of monthly income at retirement only to find out it is much more because you varied your investments.

The main risk of variable deferred annuities is that some of your money may go to waste. That is to say that if your money is being invested in riskier stocks and funds, the payout may be higher, but if the investments don’t work out, the amount lost is higher as well. Although it won’t affect your lowest guaranteed amount, if you were to invest that money in a different way, you may have more payout in the end. You need to decide for yourself if the risk is worth it or not.

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How Do I Find a Solid Variable Deferred Annuity to Invest In?

Most annuities are provided through employers or through membership-based organizations. It is important to understand what your employer is doing with your money and how it is being invested. Typically speaking, the larger the employer you work for, the more investment options are available. As long as there is a guaranteed payout amount, you can choose to trust your employer or another organization you are a part of to invest your money.

However, be sure to check quarterly or annual reports to see what kind of reward and loss is taking place in the investments being made. If you see consistent loss, perhaps the money of the employees and company is not being invested as wisely as it could be. As an employee, you should have access to the financial report of your company, especially if your own money is being invested.

If you don’t have an annuity through your employer, you can meet with a financial planner who can help you find an annuity that works for you or you can find one on your own. The best way to find an annuity on your own is to compare what several companies have to offer using an online comparison tool. This type of tool allows you to compare rates and payout options from several companies so you can choose the company that is right for you.

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