Fixed Annuities Cincinnati
Immediate and Deferred Annuities
An annuity may be an “immediate” annuity or a “deferred” annuity. In the case of an immediate annuity, a person deposits funds with an insurer and a payout option begins “immediately” (may take 30 to 45 days). With a deferred annuity, an individual deposits funds (in a lump sum or through contributions over time) and “defers” annuity benefits until a later date, such as retirement.
Deferred annuities have two phases, an “accumulation” stage and an “annuitization” stage. The first phase is the accumulation stage in which funds are built up inside the annuity. During this stage funds are added to the annuity by various means. Funds may be transferred from one annuity to another via a 1035 exchange. Interest earned on funds inside an annuity grow at on a tax deferred basis. Tax deferred generally means that no taxes are due on earnings until funds are withdrawn. During the annuitization stage (or payout stage), a variety of payout options are available.