A deferred annuity is considered to be a type of an annuity between you and an insurance company whereby your money grows tax deferred, which means you don't pay taxes on your earnings until you withdraw money from your annuity. The taxes you would normally pay on interest earnings stay in your annuity and compound to help the value of your account grow faster. A deferred annuity has two phases, the savings phase, where you invest money into your account and then the income phase, where the deferred annuity is converted, and then the payments can be distributed. A deferred annuity can either be a variable or fixed annuity. A deferred annuity is only taxed upon the withdrawal of the money. Furthermore, a deferred annuity can also provide a death benefit, so that any beneficiaries of your annuity are certain to receive the principal and the invested earnings.