A deferred annuity is a financial contract between an insurance company and an annuitant that allows the annuitant to save money over time and potentially receive regular income or a lump sum of money at the date of maturity. With a deferred annuity, the annuitant pays a series of premiums to the insurance company over the period of the annuity. These premiums accumulate in the annuity and are invested in either a fixed, indexed, or variable product by the issuer.

When the annuitant reaches maturity, they can access benefits in the form of income payments or a lump sum depending on how the annuity was purchased. Withdrawals from a deferred annuity may sometimes be subject to a surrender charge or a 10% tax penalty if the owner of the annuity is under age 59½.

An important difference between deferred and immediate annuities, is that deferred annuities are not initially paid out; the annuitant accrues the money over time, often years, and then the annuitant will receive their money sometime in the future. In contrast with a deferred annuity, an immediate annuity requires an up-front premium that pays out immediately, in the form of an annuity.

Another benefit of investing in a deferred annuity, is that when annuitants need to pay for long-term care later in life, the policyholder does not have to worry about their financial security, as their annuity benefits should stay intact regardless of their health care needs. This is especially beneficial for those who worry about their future financial stability.

In conclusion, a deferred annuity is an insurance product that offers the investor an income stream at some point in the future and can provide a variety of benefits over the life of the contract. It is important to consider all the possible options before choosing a deferred annuity, including the type of annuity, the applicable surrender charges, and the applicable tax penalty in order to choose the most suitable annuity for your individual long-term retirement needs.