What is the difference between immediate annuities and deferred annuities?

Immediate annuities and deferred annuities are two types of annuities, which are financial products where an insurance company pays a set amount of money over a set period of time. The primary difference between immediate annuities and deferred annuities is when the payments will start. With an immediate annuity, the contract is purchased with a lump sum and payments begin immediately. These types of annuities are usually purchased by people looking to receive a steady income stream and require life insurance-related guarantees. Immediate annuities can be structured to pay out over a specified period of time, such as 5 or 10 years, or for life. Deferred annuities, on the other hand, are purchased with a lump sum and payments do not start until a specified period of time has passed. The only payments received prior to the specified time are from the growth of the investment. This type of annuity is usually purchased by people looking to save money with the intention of future distribution, such as for retirement. In Minnesota, annuities are regulated by the Minnesota Department of Commerce. All insurance companies offering annuities must be licensed and in compliance with the Minnesota insurance laws.

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What is the difference between immediate annuities and deferred annuities?

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