There are two primary classes of annuities, immediate and deferred. Immediate annuities are typically funded with a single premium payment and begin their distribution phase immediately. However, there is a subclass of Immediate annuities that allow the immediate income to be deferred for a short period of time.
Deferred annuities are a more complex contracts with two basic phases, accumulation phase and distribution phase. Deferred annuities are funded with either a single premium or a flexible (many) premium schedule. Single premium funded deferred annuities are typically used for IRA and 401K rollovers for qualified asset management, but are also used for non qualified asset management. We will speak more to deferred annuities construction below.
Deferred Annuity Phases
There are two phases of a deferred annuity, the accumulation phase and the distribution phase. The accumulation phase begins when assets are deposited into the contract and continue until the the contract owner decided to begin the distribution phase. Assets grow on a tax deferred basis during the accumulation phase.
Deferred Annuity Types