A tax-deferred annuity is a contract for people who want to save on a tax-deferred basis for many years, and then convert to a payout schedule once they retire. Contrarily to an immediate annuity, the tax deferred annuities do not become payable until some years after its purchase. The single premium or regular premiums are capitalized during the deferred period, then the built up capital is converted into an annuity.

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