What is the typical characteristic of an accumulated deferred annuity?

An accumulated deferred annuity is designed specifically to allow funds to grow over time before any withdrawals are made. This type of annuity accumulates value during an accumulation phase, during which the investment can earn interest, dividends, or gains without being taxed. The primary purpose is to provide a tax-advantaged way to save for retirement or long-term goals, allowing the investor to defer withdrawals until a later date when they may be in a lower tax bracket or ready for retirement income.

This feature of delayed payouts distinguishes it from immediate annuities, which begin payments right away. Additionally, while these annuities may offer some investment options or sub-accounts, the essence of an accumulated deferred annuity is rooted in its growth potential prior to any distribution. Therefore, the characteristic of allowing funds to grow over time is central to understanding what defines an accumulated deferred annuity.