Flexible Premium Deferred Annuity
What Does Flexible Premium Deferred Annuity Mean?
A flexible premium deferred annuity is a retirement plan that allows choice in the mode of payment and payout. It guarantees an annuitization that is not less than the total amount of payments, and the taxes are deferred until payout.
Insuranceopedia Explains Flexible Premium Deferred Annuity
When someone wants to buy this annuity, they have a choice between three payment schedules: a lump sum payment, a monthly payment, or a yearly payment. They also have a choice of payout schedules, which are, like the payment schedules, lump sum, monthly, or annual.
The flexible premium deferred annuity guarantees that the payout matches the total amount of premium payments—or even more if the premiums are placed into profit-yielding investments.
Premiums paid are not taxed, even if they yield interest; taxation is only imposed on the payout. Should the annuitant withdraw from the annuity, they pay taxes for the premiums paid so far as well as a surrender charge (both will be deducted from their return of premium payments). However, if they turn the payments to another retirement plan, they will not be taxed.