During the accumulation phase your assets are invested for potential growth. You can make a single, lump-sum investment or build assets with multiple payments over time. During the payout phase you begin receiving payments. This is also called annuitization. Typically, this is during your retirement.
Most annuities provide a variety of payout options.
For example, you could choose to receive a lump-sum payment, payments for a set period of years, or payments for the rest of your life. Or you might structure payments to increase over time. Having flexibility in making and receiving payments allows you to structure an annuity to fit your budget and your retirement goals. In accordance with Section 72 of the Internal Revenue Code, all assets invested in an annuity earn interest on a tax-deferred basis. The cash value is allowed to accumulate free of current income tax.