Deferred Income Annuities: Who They Are Genius For, and Who Should Skip Them
Written by Hans Goldstein, EA, licensed insurance agent · CA 4273294Admitted to practice before the IRS
Short answer: a deferred income annuity (DIA) is genius for three people: someone with $1 million to $5 million of idle cash on a fixed stay in a wealth-tax country who will return to the US, a retiree who fears outliving the money, and a saver who wants the tax later. It is a bad idea for most 35-year-olds, for anyone who needs the money back, and for anyone in poor health. It is irrevocable after the free-look period. All numbers are rounded ballparks on non-qualified (after-tax) money, not tax advice.
The answer in one table
| Profile | Verdict | Why |
|---|---|---|
| 35 years old, moving to Norway or another wealth-tax country | Usually skip | Norway taxes only net wealth above NOK 1.9 million per person; a home counts at 25%, shares at 80% and a mortgage is deductible. Most 35-year-olds owe little, and the money is locked up for decades. |
| Cash-heavy, $1M to $5M idle after a sale, fixed stay abroad, returning to the US | Genius | A life-only DIA from a US insurer never licensed in Norway is outside Norwegian wealth tax, and checks that start after you leave are not taxed by Norway. |
| Retiree, 65 to 75, afraid of outliving the money | Genius | Longevity insurance. A couple in their early 70s can see about 7.5% to 8% a year starting now, about 11% starting in 5 years, about 18% in 10 (real quotes, rounded). |
| US saver who wants the tax later | Good fit | No 1099 during the deferral years, and only part of each check is income afterward. |
| Needs access to the money | Skip | Irrevocable after the free look. No cash value. |
| In poor health | Skip | You are paying for a long life you may not have. A life-only contract pays nothing if you die early. |
Who they are genius for
- Cash on a fixed stay in a wealth-tax country. After a sale you may hold $1 million to $5 million in cash. Cash counts at 100% for Norwegian wealth tax. A life-only DIA is not counted, and the checks start after you leave, so Norway taxes neither the contract nor the payments. See how an American lowers Norway wealth tax, the couple 72 and 71 and the couple 70 and 68. Try your own ages in the calculator.
- Retirees who fear outliving their money. The payout is higher because people who do not live long help fund those who do. Waiting 5 or 10 years raises the check a lot. Two starts, say in 5 and 10 years, give you a step-up that a flat check cannot. See the article on what pencils.
- Tax-later savers. Nothing is reported while a DIA waits, and each check is part return of your own premium (IRC 72(b)). It is deferral, not forgiveness, and it works best if your later income is lower.
Who should skip
- Most 35-year-olds. The wealth tax has a floor, a home counts at 25% and a mortgage is deductible, so there is rarely much tax to save. Locking money away for 10 years or more costs flexibility and growth.
- Anyone who needs liquidity. A DIA is irrevocable once the free-look period ends.
- Anyone in poor health. The contract rewards a long life.
- Staying in Norway for life. Norway taxes every check at 22% while you live there, and a municipal nursing home can take up to about 85% of annuity income but does not charge the house.
The mechanics that matter
- Irrevocable. SPIAs and DIAs cannot be undone after the free-look period.
- The 59½ rule on non-qualified money. A life-only payout before 59½ is penalty-free as a series of substantially equal periodic payments (IRC 72(q)(2)(D)). A period-certain payout before 59½ pays the 10% additional tax on the taxable part. The immediate-annuity exception (72(q)(2)(I)) does not cover a DIA, which starts more than a year after purchase.
- Riders. Avoid features that create cash value (acceleration, cash refund, return of premium) if you want the contract outside Norwegian wealth tax. A cash-refund feature may be read as savings insurance, no ruling covers it, and it cuts each check.
- Timing. Buy before you leave the US, with a US address and bank account.
Example: a 35-year-old with $500,000
Suppose a 35-year-old puts $500,000 into a deferred annuity, income from age 45, then spends 10 years in Norway. Rounded, modeled:
| Payout | Income from 45 | 10% penalty before 59½ |
|---|---|---|
| 10-year period certain | about $94,000 a year | about $4,500 a year on the taxable part |
| Life only | about $30,000 to $35,000 a year for life | None (72(q)(2)(D)) |
Wealth tax saved over the stay: about $50,000 to $60,000. That sounds like a win, but the money is locked up for the rest of a long life, and a home would cut the wealth tax too, at 25%. This is why most 35-year-olds should skip it.
Assumptions
- Non-qualified (after-tax) money, not IRA money; IRA money works differently (IRC 72(t); a QLAC must start by 85).
- Payouts are rounded ballparks from real quotes and a mortality model, not quotes for you. Get your own.
- Norway rules: 2026 wealth tax 1.0% above NOK 1.9M per person; no ruling covers a US contract.
I am a US-licensed insurance agent and do not give Norwegian tax or legal advice. This is education, not tax advice.
Married? Make the income outlive either of you. In Norway only the sponsoring spouse’s income counts, so the annuity is owned by and pays the sponsor. A joint and survivor payout then keeps paying the other spouse after the sponsor dies. If a single-life annuity is on one spouse and that spouse dies first, the payments stop, and the surviving spouse may have to show income of their own at the next renewal. A joint and survivor annuity, which keeps paying until the second death, or a separate annuity on each spouse closes that gap. Joint and survivor pays less per dollar than single life, so ask for both quotes and compare.
Frequently asked questions
Related reading
- Moving abroad on a fixed income: the hub
- How an American lowers Norway wealth tax
- Case study: couple 72 and 71, $1M home or home plus DIAs
- Case study: parents 70 and 68, 10 years in Norway
- DIA ladder vs real estate calculator
- Home, rental unit or DIAs: what pencils
- Deferred income annuities explained
Sources
- 26 U.S.C. 72 (exclusion ratio; 72(q)(2)(I) and 72(u)(4) immediate annuity; 72(q)(2)(D) life payments)
- Skatteetaten: Wealth tax rates 2026
- Skatteetaten, Skatte-ABC 2025/2026 F-24 Livrenteforsikring (F-24-2.1 wealth, F-24-5.1 income)
- 26 U.S.C. 86 (Social Security benefits in gross income)
- 26 CFR 1.401(a)(9)-6 (annuity payments, qualifying longevity annuity contracts)
Goldstein & Co. LLC dba Goldstein Insurance Services · Hans Goldstein, licensed insurance agent, CA lic. #4273294 · NPN 20602398 · 213-414-2808 · hans@hansgoldstein.com
Education, not tax, legal or immigration advice. Rules, thresholds and exchange rates change; confirm with the consulate or immigration authority and a local tax adviser before you act, and get answers in writing. Hans Goldstein is a licensed insurance agent (CA 4273294) and can only offer annuities to residents of states where he is licensed. Annuity payments are guaranteed by the issuing insurer’s claims-paying ability, not by any government. Payout figures are illustrations from a published survey, not quotes. Immediate annuities are generally irrevocable.