What is a key benefit of a tax-deferred annuity?

A key benefit of a tax-deferred annuity is tax-free growth until withdrawal. This means that the earnings on the investments within the annuity can accumulate without being taxed during the accumulation phase. As a result, individuals can grow their savings more effectively because the money that would have gone toward taxes can remain invested, potentially leading to a larger amount available for retirement or other financial goals when the funds are eventually withdrawn. This feature is particularly attractive for long-term savers who wish to maximize their investment growth over time without immediate tax implications.

Other options do not represent the primary advantage of a tax-deferred annuity. For instance, immediate access to funds is generally not a feature of tax-deferred annuities, as they are designed for long-term savings. Guaranteed interest rates can apply to certain types of annuities but are not inherent to all tax-deferred annuities. Unlimited contribution limits are not applicable since tax-deferred annuities typically have specified limits on contributions, so individuals can't contribute any amount without facing potential tax penalties.