Your Retirement Center - Immediate vs. DeferredA deferred annuity gives you the opportunity to build your retirement savings over a period of years. What you're deferring is the time at which you begin to receive income. In the period between signing the contract and converting your accumulated assets to a revenue stream, your principal is in either a fixed account, variable separate account funds, or both. Unlike an immediate annuity, which you must purchase with a lump sum, you can build your deferred account with a lump sum, a series of payments over time, or both. The ability to combine one-time and periodic contributions may give you added flexibility in building a larger retirement resource. But that alternative isn't always available. You continue to have access to your money in a deferred annuity until you convert your accumulated assets to a revenue stream. This means you can make limited annual withdrawals, or surrender the contract entirely, getting back its current value minus
any surrender fees. But if you do withdraw, the money will be gone, and your retirement account will be reduced. You may also have to pay taxes on any increase in value and an early withdrawal penalty if you're younger than 59½. Deferred annuities are especially appealing if you've put as much into your employer'ssalary reduction plan as you can but want to put away more for your retirement. And if you aren't earning income, a deferred annuity is one way for unearned income from your investments or other sources to grow tax deferred.
There are no federally imposed annual limits to the amount you can contribute to a deferred annuity you purchase on your own — as there are with employer sponsored plans and IRAs — so you can contribute more when you have more on hand, for example as the result of a big bonus, a short-term, high-paying job, or other windfall.