What is a deferred annuity? A deferred annuity is the opposite of an immediate annuity. Instead of payments starting immediately, there is a deferral period where the money you put into the annuity may earn interest. After that time period, usually at least 12 months from the issue date, the annuity may start the payout or income period. Payouts can begin as soon as 13 months after purchase or be deferred for several decades, based on the terms of the contract.

How does it work?

As with all retirement income annuities, you put your money into the deferred annuity and the specific contract you choose will determine your terms. Your terms can include: length of the deferral period, how your interest will be determined, length of the payout period, how the amount of your payments will be determined, and other benefits or features that allow you to choose a product that fits your needs and retirement objectives.

Benefits and risks of deferred annuities

Because of the potential interest credited to the annuity during the deferral period, deferred annuities generally offer a higher payout than immediate annuities. The longer the deferral period, the better off you’ll be. However, there are tradeoffs associated with any type of annuity product, and deferred annuities are no exception. You will not have easy access to all of the money you put into the deferred annuity without paying an early withdrawal fee, so be sure that you will not need the money you set aside until your payment period. You’ll also be locked into the terms of the deferred annuity for the length of the contract term, which could span many years, so you’ll want to choose your contract terms and product features carefully.


If you’re looking for guarantees, potential interest accumulation, and flexibility in deciding when your annuity payouts will begin, a deferred annuity could be right for you. You can choose an annuity that fits your retirement income objectives whether it’s in 13 months or 20 years—it’s up to you.