What is the difference between immediate annuities and deferred annuities?

Immediate annuities and deferred annuities both involve using money to purchase an annuity contract from an insurance company. The primary difference between the two is when the payments begin. Immediate annuities typically begin soon after the purchase of the contract. This type of annuity is used to convert a lump sum of money into a guaranteed stream of income. The lump sum is invested into the contract, while the insurance company makes payments back to the buyer. Deferred annuities, on the other hand, do not begin distributing payments until sometime in the future. This type of annuity is used to save for retirement, as the money can be invested into the annuity and allowed to grow over time. Once the buyer reaches retirement age, they can then begin drawing on the payments as income. In Texas, both of these types of annuities are covered by insurance law. This means that when entering into the purchase of either type of annuity, the buyer is protected from certain risks and will receive certain benefits outlined in the state insurance law code.

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What is the difference between immediate annuities and deferred annuities?

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