Accumulation Phase:

This is the period during which you make payments into the annuity. The funds grow on a tax-deferred basis, meaning you don’t pay taxes on the earnings until you start receiving payments. 

• Contributions: During this phase, you make payments into the annuity, either as a lump sum or through periodic contributions. This phase is focused on building up the value of the annuity.
• Growth: The funds in the annuity grow on a tax-deferred basis. Depending on the type of annuity, the growth can be based on a fixed interest rate, market performance, or a combination of both.
• Adjustments: You can often make adjustments to your contributions and investment choices during this phase, especially with variable and indexed annuities.

Deferral Period

For deferred annuities, there is a period between the accumulation phase and the annuitization phase where the funds continue to grow until you decide to start receiving payments. 

• Waiting Period: For deferred annuities, there is a period between the accumulation phase and the annuitization phase where the funds continue to grow. This period allows the investment to potentially increase in value before you start receiving payments.
• Continued Growth: The annuity continues to grow tax-deferred during this period, enhancing the potential payout amount.

Annuitization Phase

This is the payout phase, where the insurance company begins making regular payments to you. The duration and amount of these payments depend on the terms of the contract and the type of annuity.

• Payouts Begin: This is the phase where the insurance company starts making regular payments to you. The payments can be structured to last for a specific period or for the rest of your life.
• Payment Options: You can choose from various payout options, such as lifetime income, joint life income (covering two people), or period certain (guaranteeing payments for a specific period).
• Taxation: During this phase, you will pay taxes on the earnings portion of the payments as you receive them.