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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If you are looking for a retirement annuity or an insurance annuity the answer to the question, what is the difference between a deferred annuity and an immediate annuity becomes important. Here is why the answer is so important.

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A deferred annuity will be paid-out years in the future whereas an immediate annuity will be paid out staring 30 days after you have paid into the annuity. The following article will provide additional information about deferred annuities and immediate annuities.

What is a Deferred Annuity?

A deferred annuity is an annuity that is paid out in the future. The first several years of a deferred annuity is the accumulation period. You send the funds to the annuity company, often an insurance company, and they invest those funds. After this period of paying into the annuity, the period of payout, or distribution, begins.

If the money you put into the annuity was invested wisely, your payouts will be greater than what you paid into the annuity. Each annuity is different, so the length of time between beginning the annuity and receiving the payouts will vary.

Within the deferred annuity category, there are two main types of annuities:

  • Regular deferred annuity- Invests your money in steady, low risk investments that have guaranteed returns or a high probability of returns.
  • Variable deferred annuity- Invests your money in a variety of stocks, funds, etc. Some of these investments will be medium to high risk producing a greater reward in returns but also a greater risk of loss. But even with variable deferred annuities, there is a minimum guaranteed payout that you can be sure of.

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What is an Immediate Annuity?

An immediate annuity works much differently than a deferred annuity. An immediate annuity begins to payout regular monthly payments starting 30 days after you start to contribute to the annuity. Immediate annuities are usually funded initially by a large sum of money.

The money can be obtained through a life insurance policy payout, an endowment, a trust fund, a sum of money left by a relative, a legal settlement, or the rolling over of a retirement account. Doing things this way ensures all of your money is in one place and it can be invested while you receive regular payments making more money for you in the long run.

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Immediate annuities are not ideal for someone slowly saving towards retirement or someone who does not have a significant amount of money in a lump sum to start the fund with. Immediate annuities also are invested in less risky investments so the return is not as high, but the security is greater. As with deferred annuities, there are two main options available when choosing an immediate annuity fund. Your choice will depend on how much money is in the annuity and how you want it distributed.

The two types of immediate annuities are set and lifetime:

  • A set immediate annuity pays you regular payments for a set period of time, typically five years. At the end of the set time period, you can decide if you want to renew the annuity by depositing another sum of money or be finished with your regular payments.
  • A lifetime immediate annuity pays you, your spouse, or your dependents regular monthly payments for life. If you are the main recipient, you can specify that the payments continue to your spouse or dependents after your death.

What is the Best Way to Find an Immediate Annuity or Deferred Annuity?

Once you decide what type of annuity works best for you and your family, you are ready to start looking for a company that can provide you with the annuity. In order to make the most from your money, you should choose a company that has a strong track record of consistency on returns and top notch customer service. You should be able to have input and have your questions about your annuity answered quickly anytime you want to. It is never a good idea to leave your money somewhere and not check on its growth and potential.

Finding a company with a strong track record and a good return rate can be done easily and safely online through an online comparison tool. Comparing prices and monthly premium rates is still the best way to find a good deal on an annuity option. Once you see what several different companies have to offer, you can choose the company that works for you.

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