What is the difference between a single premium and a flexible premium payment option in a deferred annuity?

The difference between a single premium and a flexible premium payment option in a deferred annuity lies in the number of payments that are used to purchase the annuity.

In a single premium payment option, the annuity is purchased with one lump-sum payment. This means that the investor contributes a single amount upfront, which then grows according to the terms of the annuity. The entire premium is paid at once, simplifying the investment process and allowing immediate growth of the funds applied to the annuity.

In contrast, the flexible premium payment option allows for multiple payments over time. This approach enables the annuitant to make contributions at various intervals, which can be beneficial for those who may not have a large lump sum available but want to invest gradually. This flexibility can enable individuals to adjust their payments based on their financial situation and goals.

Understanding these distinctions is crucial for consumers considering different strategies for saving for retirement or other long-term financial planning, as each option serves different needs and circumstances.