What is the difference between immediate annuities and deferred annuities?

Immediate annuities and deferred annuities are two types of annuities offered in California that are used to save for retirement. Both types involve making payments to an insurance company in exchange for a fixed, predetermined income in the future, but there are a few key differences. An immediate annuity begins paying out income immediately after the annuity is purchased. This means the person receives the payments immediately following their initial investment rather than waiting for the annuity to “mature” over time. For this reason, an immediate annuity is typically purchased by someone closer to retirement age who wants to begin receiving an income as soon as possible. On the other hand, a deferred annuity involves more of a long-term investment. The payments are deferred until a future date and the insurer invests the funds on the policy holder’s behalf. This type of annuity is typically purchased by younger individuals who want to start building a retirement fund early, but don’t necessarily need the income immediately. Ultimately, the choice between immediate and deferred annuities depends on individual financial needs and the age of the policy holder. Both types are beneficial for planning for retirement and provide a reliable source of income over the long-term.

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What is the difference between immediate annuities and deferred annuities?

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