Annuities have never necessarily been considered as investments by people in and out of retirement plans, there is no doubting that annuities should and will be more prevalent in retirement planning. While many annuities are marketed to the general public with a sense of sex appeal, annuities are basically divided into two types of annuities:
Deferred Annuities — With deferred annuities, one’s money is invested over a period of time with the funds eventually being taken out of the annuity. Deferral times can vary in length of time with 5, 7 and 10 year deferral periods of time being very common. This deferral period of time is an accumulation period in which your annuity funds grow.
Immediate Annuities — Immediate annuities start paying income to a person immediately. The money is given to the financial institution with payments being made to the annuitant shortly thereafter.
It is also common for one to switch their annuity from a deferral annuity to an immediate annuity. Obviously, a person may choose to have their funds in a deferral annuity and, upon nearing retirement, may switch their annuity to an immediate annuity for retirement income payments.