Annuities bear guaranteed financial fruits, but in different ways. The financial fruits of annuities depend on the type of annuity you purchase. Different types of annuities bear fruits in different ways.

Immediate annuities start the payout phase within a very short period of time; from one to 13 months. Thus the immediate annuities are the best option for the people who want to start reaping benefits in a very short period of time.

Immediate annuities are typically paid for in a single premium, since the entire premium amount must accumulate beFor the payout phase begins. The purpose of an immediate annuity typically is to convert a large sum of cash into a steady stream of income for an extended period of time. Immediate annuities are commonly used to create trust funds of various types.

Deferred annuities take little time to start the payout phase. The payout phase in deferred annuities starts some time after purchase; typically about seven to 10 years later, although some contracts can defer payout for 20 years or longer. Deferred annuities are one of the popularly selling annuities these days. Most of the deferred annuities are purchased through installment premiums, although single premium deferred annuities are also common.

The greatest advantage of deferred annuities is that they allow your investment to grow tax-deferred for an extended period. This means you don’t pay taxes on the annuity’s earnings as they accumulate, only when you make a withdrawal or receive a payout. A tax-deferred investment will generally grow at a higher rate than a comparable type of investment in which earnings are taxed annually. However, because most annuities charge a significant penalty for early withdrawal, you will probably need to leave your money untouched in the fund for seven to 10 years beFor you will realize the benefits of tax deferral.

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