There are a large number of annuity products available today and one of the reasons annuities are not well understood is that some of the terms used to describe the various products can be confusing.

There are two basic types of annuities.

Deferred Annuity
A deferred annuity is a long-term investment designed to help you grow your assets and provide a steady income stream for your retirement. Basically, that means you invest your money now and hold off on using it until you're ready to retire. You get to invest on a tax-deferred basis, so you don't pay taxes on any accumulated earnings until you withdraw your money. And then, only your earnings are taxed as ordinary income.

Immediate Annuity
An immediate annuity provides consistent and stable income. You know that a check for a specific amount will be received on a regular basis and that the income will continue for as long as you have requested. An immediate annuity is sometimes referred to as an income annuity.

Both deferred and immediate annuities offer fixed or variable income options.