Which of the following best describes a Deferred Annuity?

Which of the following best describes a Deferred Annuity?

• A. Payments begin immediately
• B. Payout begins within 12 months
• C. Single payment only
• D. Variable payouts

Answer: (B)

A Deferred Annuity is a financial product designed to help individuals accumulate funds for retirement or future financial needs. The defining characteristic of a Deferred Annuity is that it delays the payout stage until a specified future date, which is typically more than 12 months from the initial investment. When the correct choice is selected, it indicates that the payouts from the Deferred Annuity will begin within a year after the investment. This aligns with the nature of Deferred Annuities, as they often accumulate value over time, allowing for growth through interest or investment gains during the accumulation phase before turning to the distribution phase, when payouts kick in. This differentiation from immediate annuities, where payouts start almost right away, highlights a critical function of Deferred Annuities—providing a way to grow savings over time before converting those funds into income. The other options illustrate different aspects of annuities or investment products that do not align with the definition and functioning of a Deferred Annuity.

A Deferred Annuity is a financial product designed to help individuals accumulate funds for retirement or future financial needs. The defining characteristic of a Deferred Annuity is that it delays the payout stage until a specified future date, which is typically more than 12 months from the initial investment.

When the correct choice is selected, it indicates that the payouts from the Deferred Annuity will begin within a year after the investment. This aligns with the nature of Deferred Annuities, as they often accumulate value over time, allowing for growth through interest or investment gains during the accumulation phase before turning to the distribution phase, when payouts kick in.

This differentiation from immediate annuities, where payouts start almost right away, highlights a critical function of Deferred Annuities—providing a way to grow savings over time before converting those funds into income. The other options illustrate different aspects of annuities or investment products that do not align with the definition and functioning of a Deferred Annuity.