The Accumulation and Annuitization Phases of an Annuity
An annuity is a financial contract offered by insurance companies to provide a series of payments over a specified period of time or for the lifetime of an individual. The accumulation phase of the annuity refers to that period of time in which the annuitant contributes cash to the account. The accumulation phase often lasts anywhere from several years to multiple decades. During the accumulation phase, the investor may be allowed to move money among investments within the annuity without having to pay income or capital gains taxes on the profits.
After the accumulation phase is completed, the annuitization phase often begins-the distribution of payments to the annuitant. Typically, the more the investor has contributed during the accumulation phase, the greater the annuity payments they can expect.
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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.
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