Flexible Premium Deferred Annuity

What is a flexible premium deferred annuity?

A flexible premium deferred annuity, or FPDA, is a contractual agreement that provides income for the annuitant during its payout period, typically during retirement; flexible premium deferred annuities are distinguished from other types of annuities due to the variable nature of their terms. The frequency of premium payments can range from monthly to annual or one-time lump sum payment depending on the terms of the contract; this provides unparalleled convenience and customization for account holders. In the same way, the payments made at the maturity of the flexible premium deferred annuity can be distributed monthly, quarterly, twice yearly, or annually according to the annuity’s contractual terms.

Advantages of FPDAs

Flexible premium deferred annuities offer significant advantages for individuals who want to plan for retirement. Contributions and earnings on these annuities are usually tax-deferred until distribution; this means that no taxes are due until the funds in the account are distributed to the annuitant. Because both contributions and earnings on the account are tax-deferred, the funds in the annuity can grow more rapidly. FPDA funds guarantee their payments if all conditions of the annuity are met. Regardless of downturns in the stock market, the principal is guaranteed not to decrease in nominal value.


FPDAs are a reliable, secure way to save for retirement or for other financial needs; because the terms are highly flexible, they can be tailored to meet the individual investor’s needs and preferences. For instance, one investor might want to make monthly premium payments while receiving the money in annual disbursements, while another may make a lump sum payment at the beginning of the flexible premium deferred annuity and take monthly payments during the entirety of the payout period. Even the amount of premiums and distributions can be tailored to fit the situation; premium payments that increase steadily are typical, but any terms mutually advantageous to the annuitant and the annuity provider can be agreed upon and enforced in FPDA contracts.

Requirements of FDPA's

In most cases, a surrender charge period applies to distributions from a flexible premium deferred annuity ; this period typically lasts for five to ten years, but may last a shorter or longer number of years as outlined in the contract. The surrender charge is applied if the annuitant wishes to withdraw some or all of the funds and to alter the terms of the contract; usually the amounts withdrawn are subject not only to fees from the annuity provider, but also to taxes from the IRS. FDPAs that are immediately transferred into another qualifying retirement account, however, are exempt from such taxation assuming the transfer takes place within a reasonable amount of time.
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