Income that starts later
A deferred income annuity accepts a premium today and schedules income to begin at a future date. Deferring the start date can increase the income amount compared with beginning payments immediately, although actual amounts depend on the contract and selected options.
Why people consider one
People may use a deferred income annuity to create a future income floor, cover essential expenses later in retirement, or address longevity risk. Qualified longevity annuity contracts, or QLACs, are a specialized form subject to federal tax rules and limits.
Trade-offs to review
Liquidity is often limited. The value may be primarily in the future income promise rather than an accessible account balance. Death-benefit and refund choices can affect the future payment amount.
Questions to ask
- When will income begin?
- Can the start date be changed?
- What happens if the owner dies before income starts?
- Are payments for one life or two?
- Is there an inflation adjustment?
- What access, if any, exists before the income date?
The right start date and payout option depend on the role this income is meant to play in the broader retirement plan.