Accumulation Phase

• During the accumulation phase, the investor (annuitant) makes systematic contributions to the annuity. The money earns interest on a tax-deferred basis, meaning that no taxes are paid until the money is withdrawn, typically when the annuitant retires.
  
  

Annuitization

• At the end of the accumulation phase, the investment "annuitizes," meaning that the investor begins to receive payments. The investor usually receives a fixed monthly payment for the rest of her life, with the amount based on her age and the value of the fund. She may also elect to receive the money over a specified time period such as 10 or 20 years.
  
  

Considerations

• The annuitant may designate a beneficiary to continue to receive the payments after his death. For example, if the annuitant elected to receive the payout over 20 years and he dies in year eight, his spouse could then receive the payments for the remaining 12 years.