A “tax-deferred” annuity is an annuity in which taxation of interest or other growth is deferred until it is actually paid. The contract owner contributes funds to the annuity in a lump sum or through annual payments to the annuity. The money is then allowed to grow for a period of time on a tax-deferred basis. At a future date the money is “annuitized”, and accumulated funds are paid out, generally through periodic payments made over either a specified period of time, or the life of an individual or the joint lives of a couple.
Annuities are used for many purposes in addition to providing lifetime income. They may be used to accumulate funds for some future event, e.g. education, a court settlement, or a lottery.
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What is the future value of an annuity calculator?
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