Annuities✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
The most common personal use of a deferred annuity is to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Deferred annuities are used to build a retirement fund: premiums grow tax-deferred during accumulation, and the owner later converts the account into a guaranteed income stream. This is the signature personal application of annuities. Tax deferral on growth is the key advantage over ordinary taxable savings, and annuitization converts the accumulated value into lifetime income.
Why the other options are wrong
- B) Annuity benefits on death are not generally income-tax-free the way life insurance proceeds are; amounts above basis are taxable.
- C) Replacing a breadwinner's lost earnings is the purpose of life insurance, not annuities.
- D) Medical expense funding during working years is a health insurance function, unrelated to annuity accumulation.
Memory hook
Deferred annuity = the tax-sheltered savings jar that later becomes a paycheck.