WKBT February 4, 2021 8:50 AM David Rodeck - Forbes Advisor Posted: Updated: February 6, 2021 5:26 AM A deferred annuity is an insurance contract that generates income for retirement. In exchange for one-time or recurring deposits held for at least a year, an annuity company provides incremental repayments of your investment plus some amount of returns. This helps you accomplish two financial goals: Building up your nest egg for retirement and then generating income once you get there. Here’s how deferred annuity contracts work and when they might make sense for your financial situation. How Does a Deferred Annuity Work? A deferred annuity works much like most other annuities. You transfer money to an annuity provider that invests your cash according to the strategy and annuity type you pick. You can send a large amount of money once or transfer smaller amounts over months or years. Then, at least a year after you opened your deferred annuity, you can request payments from your annuity.