Why might someone choose a deferred annuity?

Choosing a deferred annuity is a strategic decision for individuals looking to delay income and grow their investment over time. One of the primary benefits of a deferred annuity is that it allows individuals to invest money while deferring taxes on the investment's earnings until they withdraw the funds. This tax-deferred growth can be particularly advantageous for those who want to accumulate a larger nest egg before retirement or another target date. By postponing taxes, individuals can potentially grow their investments more effectively than if they were subject to immediate taxation on earnings.

In contrast to the other options, securing a higher payout rate typically pertains to immediate annuities rather than deferred products, which are designed for accumulation rather than immediate income. The structure of deferred annuities intentionally delays access to funds, which conflicts with the idea of accessing funds quickly. Overall, the primary appeal of deferred annuities lies in the tax advantages they offer during the accumulation phase.