Immediate Annuity vs. Deferred Annuity: What’s the Difference?

Two Fundamental Annuity Structures

Every annuity is either immediate or deferred — this determines when your income payments begin.

Immediate Annuities (SPIAs)

A Single Premium Immediate Annuity (SPIA) starts paying you income within 30 days to 12 months of your purchase. You hand over a lump sum and income begins almost immediately.

• Best for: Retirees who need income right now
• Typical buyer: Ages 65–80
• Income start: 1–12 months after purchase
• Flexibility: Very low — once you annuitize, the decision is usually irreversible
• Example: $200,000 premium → $1,100/month for life (rates vary by age and insurer)

Deferred Annuities

A deferred annuity has an accumulation phase before income begins. You fund it now, let it grow for 5–15 years, then turn on income later.

• Best for: Pre-retirees who want to build a future income stream
• Typical buyer: Ages 50–65
• Income start: Years or decades later
• Flexibility: Higher — you can adjust strategies during accumulation

Deferred Income Annuities (DIAs)

A hybrid: you fund it now but income doesn’t start until a specific future date — often 10–20 years out. Sometimes called a “longevity annuity.” These can be extremely efficient because payments are much higher when income is deferred a long time.

Which Is Right for You?

• Retiring now and need income: SPIA or FIA with income rider turned on
• 5–10 years from retirement: Deferred FIA — accumulate now, activate income later
• Worried about extreme longevity (age 85+): Consider a DIA starting at 80–85