Deferred annuity is a best option for those who are looking to save on tax deferred basis for retirement. It’s an excellent retirement saving vehicle. Basically tax deferred annuity is a contract between two parties- annuitant and an insurance company under which the insurance company agrees to maintain the annuity and optionally convert accumulation value to a monthly payout once he/she retire, in return of a specified premium.

Deferred annuities are type of long-term personal retirement accounts designed to provide a steady income stream after your retirement. These are most popular among various retirement saving tools as all of your earnings are tax deferred. It means you don’t need to pay any taxes on your gains until you take out your money. Usually amounts withdrawn prior to age 59½ are subject to a 10% federal income tax penalty as well as ordinary income taxes.

Deferred annuity is a great way to accumulate money until a future point of time when you will need it. Deferred annuity lets you as an annuitant to compound your earnings and reduce the tax you would have to pay in long run. That’s why income from deferred annuities grows faster as compared to annuities that do not provide tax deferred facility.

Basically there are three types of tax deferred annuities- fixed deferred annuity, equity indexed annuity and variable deferred annuity. Fixed deferred annuities are important tools for arranging funds for retirement. The money in your annuity earns a fixed rate of interest and your money accumulates on a tax-deferred basis. Fixed deferred annuities contain provisions that allow the annuitant to minimize the risk during market decline. They also provide an income stream that can’t be outlived by the annuitant.

Indexed deferred annuities offer the opportunity to make more interest than you would in fixed deferred annuities at times when there is boost in the stock market. The interest rate of indexed annuities is calculated on the basis of the performance of a financial index, such as the Standard & Poor’s 500 Index3. Variable deferred annuities are risky options as they greatly depend on market conditions. You have to face the risk of losing your principal investment when the market does not perform well.

For any help regarding deferred annuities, click here or call an Annuity Specialist at AnnuityForLife.com, 1-888-261-6237