Deferred annuities have the distinct accumulation and annuity phases discussed more fully above. An annuitant could purchase a flexible premium deferred annuity at age 30 with an inheritance, and wait until age 65 to annuitize the contract. During the 35 years between purchasing and annuitizing the contract, the money invested would be credited with a guaranteed interest rate, and would grow tax-deferred. In addition, the annuity holder would also be free to make additional deposits at any time during the accumulation phase.

In contrast to deferred annuities, with an immediate annuity, the contract is annuitized immediately after the initial deposit (premium) is paid. The annuitant does not have the option of making additional deposits to the contract, as regular, fixed payments will begin right away based on the amount initially deposited.

Equity indexed annuities, also sometimes referred to simply as “indexed annuities,” are riskier than fixed annuities, but less risky than variable annuities. Like fixed annuities, equity indexed annuities offer a fixed, guaranteed rate of return. This is also combined with an interest rate that is tied to a market index, such as the S&P 500 Composite Stock Price Index. This can give investors a chance to earn higher interest than what they would get in a fixed annuity, without assuming as much risk as they would have with a variable annuity product.