What is the difference between immediate annuities and deferred annuities?

Immediate annuities and deferred annuities both provide a steady stream of income, but they differ in regards to when payments begin. With an immediate annuity, payments start right away, while with a deferred annuity, payments are delayed until a specified later date. Immediate annuities are often used to turn a lump sum of money into a steady stream of income. The annuity company invests the money, and the policyholder receives payments that increase in value each year in exchange for a lump-sum premium. Immediate annuities can provide guaranteed income for life, or for a set time period. Deferred annuities, on the other hand, are often used as a way to save for retirement. They are funded over time with periodic payments over a set period of time, or with a single lump sum. The annuity company invests the money, and the policyholder receives payments at a predetermined date in the future, usually once the policyholder reaches retirement age. In Indiana, both types of annuities are regulated by the Indiana Department of Insurance and are subject to certain limitations and rules. When choosing an annuity product, it is important to consider the risks before investing.

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What is the difference between immediate annuities and deferred annuities?

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