How does an immediate annuity differ from a deferred annuity?
Explanation
An immediate annuity (typically a single-premium immediate annuity, or SPIA) starts income payments within roughly one payment interval of purchase, so it is bought to generate income right away; a deferred annuity postpones the payout phase to a later date, allowing tax-deferred accumulation first. Immediate annuities are funded with a single lump sum, not level monthly premiums paid across a ten-year accumulation period. Every annuity has an annuitant (the measuring life), and no rule makes an immediate annuity credit a higher interest rate than a deferred one.
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