Why Are Annuities Tax Deferred? 
That is a great question ! There are a couple of reasons why the taxes are deferred on your annuity . The first is that by putting the taxes off until you take the payments , you have an incentive to save for your retirement . That helps everybody , as there is theoretically less need for public assistance programs , and so less need for Government funding of them . So the laws were written to give you that incentive . The second reason is that you have n't accessed the money , and therefore should n't have to pay tax on what you have n't gotten paid from . Like a capital gain tax , you do n't pay it , until you 've realized and capitalized on , the gain . I hope that helps , thanks for asking ! 