Deferred Annuity

Real estate investors often use a Deferred Annuity as a contract to delay payments to a future date that they have chosen. The advantage of using a Deferred Annuity is that taxes on all investment gains will be delayed until payment is received. Normally, if money is withdrawn before the age of 59, it will be subject to both income taxes and a ten percent penalty tax. Those who invest in a Deferred Annuity typically invest in either a variable, fixed, longevity, or equity indexed annuity. Investors who enter into a Deferred Annuity contract have an option to turn their Deferred Annuity into an immediate annuity after a specified amount of time has passed. They allow the money they receive to defer until they want to turn the investment into a guaranteed source of revenue. A fixed Deferred Annuity works like a certificate of deposit. The difference is you are not required to claim the interest income on your tax return each year because the interest is deferred at your discretion. When you invest in a variable Deferred Annuity it is similar to owning a number of mutual funds with you having control over many of the associated risks.