In the Annuity marketplace, “Deferred Annuities” can describe two components.
1) In terms of Timing of your income, you can have either an Immediate Annuity, in which income payments start immediately, or you can have a Deferred Annuity, where income payments start in the future.
2) And in terms of Taxation, all annuities enjoy Tax-Deferred Appreciation .
Generally, when people refer to ‘Deferred Annuities’ they simply refer to the timing of the cash payments from the insurance company. However, when you choose to place your money with an insurance company and grow that investment Tax Deferred, you are compounding the gains without tax, and can take those compounded gains out at a future date.
Tax deferred compounding growth, what annuities offer, is often referred to as ‘triple compounding’. Not only do you earn money on your principal, but you also earn money on your interest, and your earn money on what would otherwise be spent on taxes in other less competitive investments. Triple compounding can make an annuity investment really shine when compared to CD’s or bonds that incur taxes each year.
For more info on how an annuity can help you grow your investments and retirement income, be sure to sign up to our site and get our AST Flex Strategy videos to learn more on the tax deferred benefits an annuity offers.