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Deferred Vs. Immediate Annuities


The Annuity News Journal article by Henry Steelman, “Is it wise to delay my annuity,” examines the benefits to deferred versus immediate annuities.  When purchasing an annuity, you have the option to start receiving payments immediately with an immediate annuity or to defer your payments until some predetermined point in the future.  If you choose an immediate annuity, you will start receiving monthly payments soon after your annuity purchase.  This is the best type of annuity for someone who has just retired and needs to maintain their monthly income to meet basic living expenses.  If you have won or inherited money and don’t need it right away, it’s probably a good idea to purchase a deferred annuity.

A deferred annuity has some advantages based on your particular risk tolerance and financial needs.  If you purchase an annuity and don’t need the monthly income right away, deferring your annuity can allow you to grow your account with interest until you need to start taking payouts.  That money grows tax-deferred which is another benefit of waiting to take your money.  It’s important to look closely at the annuity rates to make sure that your interest will be greater than the rate of inflation.  Inflation makes everything cost more, so you want to grow your money more that the added costs of inflation.  Your individual situation will be the deciding factor as to whether you choose a deferred or immediate annuity.

Written by Rachel Summit

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