The advantage is that when compared to a taxable investment, every dollar you earn in interest remains available. As a result, the interest you earn each year is also available to earn interest the following year. This allows your money to accumulate much quicker because of the compound interest. There are two types of deferred annuities, variable and fixed. Fixed annuities pay a set rate of interest throughout the life of the annuity.
Variable annuities pay a rate that is determined by market conditions.
When you purchase a variable annuity, the premium is invested in stocks or bonds with the hope of increasing the value of the annuity. Payments will fluctuate with the performance of the investment portfolio so there is some risk of losing money when compared to a fixed annuity.