Final answer:
A deferred annuity accumulates funds and then liquidates them upon retirement, which is different from an A) immediate annuity that starts paying out soon after investment. Private company pensions, or defined benefits plans, also provide a fixed retirement income but do not function like deferred annuities.
Step-by-step explanation:
The savings vehicle designed to first accumulate funds and then systematically liquidate the funds is called a deferred annuity.
A deferred annuity is an investment vehicle that is often part of retirement savings strategies.
It allows individuals to make contributions over a period, which then accumulate tax-deferred until the funds are withdrawn, typically during retirement.
The options provided in this question pertain to different types of annuities. The correct answer is A) Immediate annuity, as it contrasts with a deferred annuity by providing payments to the annuitant immediately after the initial investment.
Individuals saving for old age often utilize private market options, such as investing in stocks, bonds, and annuities, that come with various degrees of risk and potential returns.
An immediate annuity, on the other hand, starts paying out soon after the investment is made, which is not designed to first accumulate and then liquidate.
Therefore, it is not a deferred annuity by definition.
Moreover, pensions provided by private companies, often known as defined benefits plans, similarly guarantee a fixed income in retirement but do not accumulate funds in the same way as a deferred annuity, highlighting further the distinction between these retirement saving products.