The Delayed Annuity: Pros and Cons

Shawn Plummer

CEO, The Annuity Expert

A delayed annuity is when the first payment is not paid immediately but sometime later (at least 1 year from the annuity start date). A delayed annuity, also known as a deferred income annuity, is a type of life annuity that guarantees a reliable stream of cash payments to an annuitant until death.

Delayed annuities may be funded with multiple contributions or one lump-sum payment.

The death benefit is often passed down to primary or contingent beneficiaries at the time of the annuitant’s death.

How a Delayed Annuity Works

A delayed annuity has 2 phases: the accumulation phase and the distribution phase. The annuity grows during the accumulation phase. The annuity pays cash payments to the annuitant during the distribution phase.

Accumulation Phase

Single-Premium Delayed Annuities

Single-premium delayed annuities are funded with a single (one-time) premium payment that will grow during the accumulation phase.

Flexible-Premium Delayed Annuities

An annuity owner may make additional payments during the accumulation phase after making an initial premium payment in a flexible-premium deferred annuity. 

Distribution Phase

Annuity owners have 3 ways to collect income in the distribution phase:

  • Annuization
  • Lifetime Withdrawals
  • Systematic Withdrawals (withdrawing like a savings account at a bank)

A delayed annuity owner may not need to convert the annuity into a series of income payments. Instead, they can withdraw money from the annuity in a lump sum, or you can transfer the money to another annuity.

When an annuity is purchased this way, the buyer retains control of the funds rather than being trapped into payments by initiating an annuitized distribution.

Helpful Tool: delayed annuity calculator

Delayed Annuity

Types of Delayed Annuities

Annuities with a long-term investment horizon can be purchased as delayed annuities, which are offered in several forms depending on the needs of the annuity owner.

Fixed Delayed Annuity

A fixed delayed annuity (also known as a fixed deferred annuity) works like a certificate of deposit, except that the tax on interest is postponed until withdrawal. In addition, the insurance company usually defines the guaranteed interest rate the annuity pays.

Variable Delayed Annuity

A variable delayed annuity (also known as a variable deferred annuity) is like investing in mutual funds in that sub-accounts performance will influence the returns. These annuities have the potential to be riskier and more expensive. Annuity owners can lose money in this type of annuity.

Delay Longevity Annuity

A longevity annuity is similar to a straight life annuity, although it usually begins much later than the retirement age. The product serves as longevity insurance in that payments may not begin until after the retiree’s other assets have been depleted.

Delayed Annuity Example

Delayed Annuities At A Glance

Fixed Index
Principal ProtectionNoYesYesYes
Access To PrincipalYesYesYesNo
Control Over MoneyYesYesYesNo
Tax-Deferred GrowthYesYesYesNo
Guaranteed GrowthNoYesYesNo
Guaranteed IncomeYesYesYesYes
Inflation ProtectionYesYesNoYes
Death BenefitYesYesYesYes/No
Long-Term Care HelpYesYesYesNo
Delayed Annuities

Delayed Annuity Quotes

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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