Traditional Annuity Types: Immediate and Fixed
With an immediate annuity, your income payments start immediately. You decide whether you want income guaranteed for a specific number of years or for your lifetime. The insurance company calculates the amount of each income payment based on your purchase amount and your Life expectancy.
A tax-deferred annuity (fixed annuity) has two parts: the accumulation where you let your money grow, and the payout. During accumulation, your money grows tax-deferred until you take it out, either as a lump sum or as a series of payments. You decide when to take Income from your annuity and therefore, when to pay the taxes.
The payout phase begins when you decide to take income from your annuity. As your needs dictate, you can take partial withdrawals, completely cash-out (surrender) your annuity, or convert your deferred annuity into an immediate annuity.