Deferred variable annuities are ideal for retirement planning, and should be to such alternatives as the 401(K), IRA, and mutual fund. They are most times used in conjunction with a 401(k) or Roth IRA to avoid the $15,000 annual contribution limit. Unlike fixed annuities, variable annuities carry market risk, which makes them suitable for those investors who have not retired.

Upon retirement, deferred variable annuities can be withdrawn out completely, annuitized, or converted into a guaranteed lifetime income. Having a deferred variable annuity through retirement is an option as long as you allocate the folder across multiple asset classes and transfer the majority of funds into fixed-interest sub-accounts. To lessen the risk, a well planned retirement plan will balance out a variable annuity with added capital in fixed-rate savings like CDs or fixed annuities.

By and large, when buying an annuity, you have to basic choices; either immediate or deferred. The immediate variable annuity normally starts to pay its dividends within the first year, often within a year. While on the other hand, a deferred variable annuity accumulates earnings over the year, until payment is requested by the investor. Often deferred variable annuities are converted into income annuities when the investor retires. In that case, the payments get distributed on a monthly basis for duration of your choosing. Also, there is the choice of making withdrawals of the payments at a single payment.

Variable annuities are deferred most times than not; because they need time to accumulate income. Most variable annuity contract owners start off with a smaller initial premium in contrast to a fixed-rate contract. Featuring flexible premiums, variable annuities can be funded many times over, like a brokerage account.

Another benefit of deferred annuities is their tax-free growth benefit. Variable annuity is not taxed until it is withdrawn. This feature allows investors to collect interest on would-be taxes. To exploit this benefit, many contract owners defer income for extended periods of time. And the longer the withdrawals are deferred, the greater the tax benefit.

However, to maximize the gain in deferred variable annuity as in the case with any investment, you should buy deferred variable annuities only if you understand how they work, what the restrictions are, what the fees are, what the commissions will amount to. In choosing between different deferred variable annuity contracts, you should also know what their underlying investment options are and how they have performed in the past. While past performance does not guarantee future results, it does help you to compare one alternative to another.

Ultimately, deferred variable annuities are ideal for those who are planning for their retirement. It helps to save a lot of cash since the payments are not made until retirement period. You must therefore make up your mind before choosing this variable annuity investment option. To get the best out it, you can consult a financial expert for guidance or surf the internet for the best deferred variable annuities.