| Immediate annuities
| Deferred annuities
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| Payout begins shortly after the premium is paid.
| Payout begins at some specified future date, allowing time for accumulation.
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| Purchase with a single premium.
| Purchase with either a single premium or periodic premiums.
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| Contract is usually irrevocable--after you enter into the contract, it can't be changed.
| Contract can be surrendered or exchanged for another annuity (Section 1035 exchange).
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| Assets do not accumulate on a tax-deferred basis. They are distributed using a predetermined formula, such as for life, for a fixed period, in a fixed amount, and so on.
| Assets accumulate on a tax-deferred basis. When distributions begin, they are made using a predetermined formula, such as for life, for a fixed period, in a fixed amount, and so on.
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| Each distribution is part tax-free return of premium and part ordinary income, depending on age and the distribution method.
| Distributions are first made from any gains/ interest earned and taxed at ordinary income tax rates; tax-free return of premium is distributed last.
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| No tax penalty on lifetime payments started before age 59½. 1
| A 10 percent nondeductible tax penalty is assessed on the gains (or interest) withdrawn or annuitized before the annuitant reaches age 59½, unless an exception applies.
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