Types of Annuities
An Immediate Annuity does just what it says. The annuity distributions begin shortly after the annuity contract is signed, usually within 1 year, and the investor has funded the annuity or paid the agreed upon lump sum payment. Immediate Annuities are usually structured as Lifetime Annuities where the annuity holder receives level, regular, lifelong payments… also referred to as a lifetime distribution. Investors can also choose a Fixed Period for the annuity distributions.
In contrast to the immediate annuity, the deferred annuity delays distribution of payments until some point in the future after the accumulation phase has past. The accumulation phase begins when the annuity contract is signed and the annuity holder makes regular, periodic payments over a specified period of time outlined in the contract. The payment funds are invested by the insurance company and earn tax-deferred interest over the life of the accumulation phase.