Contingent Deferred Annuities: Time for Renewal?
May 11, 2025 by Carlton Fields, Harry Eisenstein
Contingent deferred annuities (CDAs) represent an interesting approach to securing lifetime income but have struggled for recognition in the marketplace since their introduction more than a decade ago. Recent developments, however, offer the product a chance for new life and offer advisers an opportunity to build out their toolkits for assisting investors who want a more secure investment program.
CDAs act very much like a guaranteed lifetime withdrawal benefit (GLWB) under a variable annuity contract, in that an investor can receive lifetime income payments, even if the investor’s assets covered by the CDA have been depleted; and the amount of these continuing payments is guaranteed so long as the investor’s withdrawals have not exceeded specified amounts. Unlike GLWBs, however, the assets covered by a CDA don’t have to be held by an insurer as part of an insurance contract. Instead, CDAs, though issued by an insurance company, can be used as a “wrapper” around, for example, mutual fund shares or other investments owned by the investor and managed by the investor’s adviser.
