Benefit Payments From Deferred Annuities With Lifetime Income Riders
If the annuity has a Guaranteed Lifetime Withdrawal Benefit or an income rider, benefit payments can begin as early as 30 days after the contract is issued or one year after the contract comes into force, depending on the annuity’s terms.
Benefit Payments From Deferred Annuities Without Lifetime Income Riders
Deferred Annuities work in 2 different phases:
- Accumulation Phase: The accumulation period is the period the deferred annuity accumulates wealth before receiving an income.
- Distribution Phase: The distribution period refers to when a policy owner either annuitize their annuity to start receiving annuity payments or lifetime withdrawals from the insurance company.
If an annuity owner wants to annuitize their deferred annuity, the benefit payments are distributed through annuitzation. With every deferred annuity, there is an annuitization table that tells the owner how long they must wait before annuitizing their contract, and how long the benefit payment period must be.
Example: A deferred annuity might require the owner to defer their contract for 5 years before they can convert the money into annuity benefit payments. After the 5 years of deferral, the insurance company may then require the owner to annuitize the contract for a minimum of 10 years (usually there are several payment period options). This example would be labeled a 5×10 annuity.
Contact the insurance company for the annuitization schedule.
Withdrawing From a Deferred Annuity
If an annuity owner does not want a lifetime income rider or annuitize the contract, they can always withdraw from the annuity like a savings or checking account. Owners will have to wait as little as 30 days, up to 1 year before they can withdrawal from the deferred annuity without a surrender charge.
Owners must also be at least be age 59 1/2 to avoid the IRS early withdrawal penalty too.