Deferred income annuities (DIAs): longevity insurance explained

A deferred income annuity (DIA) is a contract in which you pay an insurer a lump sum, or sometimes a series of payments, today, in exchange for guaranteed income that begins at a future date you choose, typically at least a year and often many years away. Because the insurer holds your money for years and pays nothing to those who die before the start date (unless you add a refund feature), income per dollar is much higher than from an annuity that pays right away. It is sometimes called longevity insurance because it covers the risk of living to a very old age.

How a DIA works

A DIA has no cash value you can spend in the usual sense and no investment account. You choose the purchase amount, the income start date and the payout option. Between purchase and the start date there is nothing to manage. After the start date it behaves like a SPIA, paying a stream for life or a set period.

It differs from an ordinary deferred annuity, which accumulates a balance you can withdraw or annuitize. A DIA's income is fixed at purchase, which gives certainty and removes flexibility. LIMRA reported that DIA sales were $4.8 billion in 2025, out of $18.8 billion of income annuities and a $461.3 billion total market.

Why the income can be so much higher

Three forces work together:

1. Interest. The insurer invests your money for years before paying.
2. Mortality credits. Some buyers die before income begins or soon after. Their unpaid value helps fund payments to those who live long. Pooling is the core idea in what is an annuity and how does it work?.
3. Time. Each extra year of deferral raises the income, though by rules that depend on age and rates.

This is why a DIA is often the cheapest way to buy protection against living past, say, 85 or 90. It is also why the risk is real: if you die before the start date, with a life-only design the premium is gone, and an early death after payments begin leaves little.

Payout and refund options

A death benefit during the deferral period costs income. For a married couple, a joint-and-survivor design is the usual choice. If inflation protection is added, starting income is lower; without it, the buying power of a payment starting in 20 years can be much smaller than today's.

DIAs and QLACs

A qualified longevity annuity contract (qualified longevity annuity contracts) is a special DIA bought with IRA or workplace-plan money. The IRS allows the QLAC premium to be excluded from the balance used to compute required minimum distributions, up to a dollar limit that the IRS adjusts. Under the rules, income must begin by a stated latest age. For 2026, check the current limit with the IRS or your plan, since it is indexed. Under SECURE 2.0, RMDs start at 73 for people born 1951 to 1959 and 75 for those born 1960 or later, per the IRS. Deferring part of the balance into a QLAC lowers the RMD base. The full rules are in qualified longevity annuity contracts.

Risks and limits

• Inflexibility. Once bought, there is generally no way to get the lump sum back, apart from a short free-look window (commonly at least 10 days, longer in some states) and any commutation feature the contract offers.
• Early death. Without refund features, the premium can be lost. This is the trade-off for higher income.
• Inflation over a long deferral. A fixed income starting 15 years out may buy much less.
• Interest-rate timing. Locking in low rates is permanent.
• Insurer risk. The guarantee is only as good as the insurer for many years. State guaranty association limits apply; according to NOLHGA (as of June 1, 2025), most states cover $250,000 of annuity present value. Check yours with the state guaranty association coverage lookup. Over a long deferral, insurer strength matters and can change.
• Taxes. Nonqualified income is partly return of cost and partly taxable under the exclusion rules in IRS Publication 939; see how annuities are taxed.

A hypothetical use

Say a 62-year-old plans to spend savings carefully until about 80 and fears running out after that. They put a portion of savings in a DIA that begins paying at 80. The rest of the portfolio only needs to last 18 years, not for as long as they might live. Compare that with the alternative of an annuity that starts now, or with leaving everything invested. You can try different start ages in the annuity payout calculator. This is a way to see the trade-off, not a recommendation or a quote.

Who it suits, and who it doesn't

Often suits:

• Healthy people with long-lived families who want to insure the tail risk of very old age.
• Retirees who want to spend their other assets more freely until the income starts.
• IRA owners using a QLAC to lower required minimum distributions.

Often does not suit:

• People with serious health conditions or short life expectancy.
• Anyone who might need access to the money or whose circumstances are uncertain.
• Buyers uncomfortable with a long wait and inflation risk.
• Those who would not benefit from the additional lifetime income because pensions and Social Security already cover their needs.

Key takeaways

• A DIA buys guaranteed income that starts years from now, at a much higher rate than an annuity that pays immediately.
• The higher income comes from deferral and mortality credits; refunds and death benefits reduce it.
• It is generally irreversible and loses value to inflation unless an adjustment is bought.
• A QLAC is a DIA bought with retirement-account money that can lower required minimum distributions.
• Check the insurer's strength and state guaranty limits, since the promise runs for decades.