What distinguishes immediate annuities from deferred annuities?

Immediate annuities and deferred annuities serve different purposes based on the timing of payments. Immediate annuities are characterized by their structure of starting payouts to the annuitant right away, typically within one month of the investment. This feature is designed for individuals seeking immediate income, often during retirement when regular cash flow is necessary to cover living expenses.

On the other hand, deferred annuities allow for a period of accumulation before the payouts begin. This type can be beneficial for individuals who want to grow their investment over time before they start receiving income, which might not kick in for several years or even decades.

By identifying the immediate annuity's immediate payment feature, it becomes clear how it contrasts with deferred annuities, which do not provide income until a later date. The timing of the payout is the key distinguishing factor between these two forms of annuities.