What Is Accumulation Phase? Definition

Why it matters

During accumulation, earnings grow tax deferred, which means taxes are due when money is withdrawn. The length depends on the owner's goals and the contract terms. A surrender period may overlap this phase. When the phase ends, the owner can annuitize, take withdrawals, or move to another contract. Withdrawals before age 59 and a half may bring a federal tax penalty. Rules on contributions and options vary by carrier and contract type.

Source: investor.gov

Where we use this term

Fixed vs fixed index annuity: how do they work and who do they fit?

Related terms

Deferred Annuity: A deferred annuity is an annuity contract that delays payments until a future date chosen by the owner. Until then, the money can grow during an accumulation phase, tax deferred.
Annuitization: Annuitization is the process of converting an annuity's value into a stream of regular income payments. Payments may last for life or for a set number of years, depending on the option chosen.
Annuity: An annuity is a contract with an insurance company in which you pay a lump sum or a series of payments. In return, the insurer agrees to make payments to you, either right away or at a future date.
Surrender Period: A surrender period is the length of time, often several years, during which withdrawals above the allowed amount from an annuity trigger a surrender charge. After it ends, the owner can withdraw funds without that fee.
Fixed Annuity: A fixed annuity is an insurance contract that earns a stated interest rate set by the insurer. The rate is guaranteed for a period, and the insurer promises a minimum interest rate for the life of the contract.

All 241 terms

Why it matters

Where we use this term

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