Colorado Life Producer License Practice Test

A deferred annuity primarily serves to accumulate funds for retirement. This financial product is designed to help individuals save for retirement by allowing them to invest money over time, with the potential for tax-deferred growth. The deposits made into a deferred annuity grow on a tax-deferred basis until the policyholder decides to withdraw, typically during retirement.

When individuals reach the age of retirement, they can begin to draw income from the accumulated funds, which can be structured to provide regular payments for a set period or for the lifetime of the annuitant. This feature makes deferred annuities a strategic tool for long-term financial planning, enabling retirees to have a source of income that can supplement other retirement savings or Social Security benefits.

The other choices focus on immediate needs or benefits, which do not align with the primary function of a deferred annuity. For instance, the option that involves providing immediate income for the retiree refers more to immediate annuities. Covering immediate healthcare costs is a specific need that deferred annuities do not address directly, and offering a stable income for beneficiaries relates more to life insurance policies rather than the accumulation purpose of deferred annuities.