You do not pay taxes while your money is invested in an annuity as long as the money remains in that annuity. This allows your money to grow faster than if you were paying taxes on it each year because the money you would have paid in taxes is still earning interest in the annuity. For example, if you were to purchase a deferred annuity at age 40, but wait 20 years before receiving annuity payments or making a withdrawal, the annuity earns investment income for 20 years with no taxes to pay until you withdraw the money. Click Here to see a chart explaining the concept of Tax Deferral