What is the main advantage of a single premium deferred annuity?

A single premium deferred annuity primarily offers the advantage of tax-deferred growth until withdrawal. This means that the funds invested in the annuity can grow without being subject to income taxes in the interim. The tax-deferred status allows the policyholder to accumulate more savings over time compared to taxable accounts, enhancing the potential for a larger sum when withdrawals begin.

This option is particularly beneficial for individuals who are looking to save for retirement or other long-term goals, as it encourages saving without the short-term tax impact that comes with regular income. The savings can be invested in various vehicles within the annuity, leading to potentially higher growth rates depending on the underlying investment choices.

While other options might present certain benefits, they do not encapsulate the core advantage of a single premium deferred annuity in terms of tax deferral, which is a significant component of its appeal for long-term financial planning.