What best describes deferred annuities?

Deferred annuities are financial products designed to allow an individual to accumulate funds over time, with the intention of converting that accumulation into periodic payments in the future. The defining characteristic of a deferred annuity is that the payments to the annuitant do not start immediately but rather at a specified future date. This structure is especially beneficial for individuals who wish to save for retirement or another long-term financial goal, as it allows their investments to grow tax-deferred until they are ready to begin receiving regular payments.

By choosing this option, one acknowledges that the essence of a deferred annuity lies in its delay of payout until a predetermined time, distinguishing it from immediate annuities where payments commence right away. The other choices do not accurately capture the core feature of deferred annuities, as they relate to timing and payment structure rather than the specific mechanism of deferral central to these products.