How can a deferred annuity be funded?

A deferred annuity can be funded in either of two primary ways: through a large single premium payment or through a series of periodic premium payments. This flexibility allows individuals to choose a funding method that best suits their financial situation and investment strategy.

When funding through a single premium, the annuity is purchased with a one-time payment, which then grows over time on a tax-deferred basis until withdrawals or distributions begin. This method can be beneficial for individuals who have a lump sum available for investment.

On the other hand, funding through periodic payments allows individuals to contribute smaller amounts over time, which can make starting an annuity more accessible for those who may not have a large sum to invest upfront. This method is commonly used for individuals who prefer to budget their investments and grow their savings gradually.

Thus, the correct answer indicates the versatility of deferred annuities, accommodating different financial capabilities and preferences.