Now you have reached your retirement age, there are some important investment options for your RRSP or 401k plan. In this article, we will discuss characteristics of deferred annuity.



Deferred annuity is a contract that delays payments of income, installments or a lump sum until the investor elects to receive them. This type of annuity has two main phases, the savings phase in which you invest money into the account, and the income phase in which the plan is converted into an annuity and payments are received.

1. Fixed deferred annuity

a) A fixed interest deferred annuity is a product that is designed to help you accumulate funds for your retirement.

b) The money in your annuity earns a fixed rate of interest and the fund in deferred annuity accumulates on a tax-deferred basis.

c) You do not pay taxes on your earnings until you actually withdraw them from your policy.

d) You can choose to lock in your interest rate for different periods in this type of annuity and the money can be used to provide guaranteed lifetime income.

2. Variable deferred annuity

Variable annuities invest in the stock market with the tax advantages and other security including bonds, money market funds. At the request of the annuitant the money can also be used to provide income for the rest of annuitant life.

3. Equity index deferred annuity (EIA)

a) Equity index deferred annuity earns interest based on performance of stock market index such as the S&P 500.

b) An EIA guarantees that your principal investment will not go down in value.

c) In any given year, if the stock market go up, you as owner of EIA will enjoy additional gains. If the index goes down, your principal investment will not go down in value.

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