What is a deferred annuity?

• A. An annuity in which the rents begin after a specified number of periods.
• B. An annuity that pays out immediately after purchase.
• C. An annuity funded with a lump sum and pays out now.
• D. An annuity with no accumulation phase.

Answer: (A)

A deferred annuity is defined by a postponement of payments. The money you fund in the contract grows during an accumulation phase, and the income payments begin at a future date after a specified deferral period. That description—payments starting after a set number of periods—fits the concept of deferral exactly.

By comparison, an annuity that starts paying right after purchase is an immediate annuity; a lump-sum funding that pays out now describes a single-premium immediate annuity; and an annuity with no accumulation phase also signals no deferral period.