Payment Immediate

Under this purchase method, the investor gives the insurance company one single lump sum payment. And usually, in about 30 days the insurance company will begin monthly payments. A person who is still working and not near retirement (10 - 40 years away) would ordinarily not choose this method. This would be an alternative for someone who has a large lump sum of money and is at or near retirement and wishes to begin payout immediately.

Single Payment Deferred

This method of purchasing an annuity is 'Single Payment Deferred'. With this type of payment option the investor puts a lump sum into an annuity. The payment begins years later when the annuitant begins his payout. For example, a 30 year old decides to put $20,000 into an annuity. He wants the payout to begin when he is 65 years old.  For the next 35 years the $20,000 he put into the annuity

Periodic Payment Deferred Annuity

The third payment option is the 'Periodic Payment Deferred Annuity'. With this type of payment option, the investor puts a specified amount of money into his annuity account periodically over a period of years. However, it is possible to vary the periodic payment amount. Each time the investor puts money into the account the insurance company keeps track of the principal and interest. This method is also a good way to defer paying taxes on your earnings. As with all annuities, the tax is deferred on your earnings until you begin the payout. And what makes this even better is that if you choose a form of monthly payout, you only pay taxes on the annual payout. At retirement, most people are in a lower tax bracket.