What is the Accumulation Period in an annuity?

The Accumulation Period in an annuity is the time frame in which the contract holder makes premium payments into the annuity, allowing the investment to grow. During this period, the account accumulates interest or investment returns based on the agreement's terms. This accumulation phase is crucial as it determines the eventual payout amount during the distribution phase once the annuity is converted into income payments.

As the annuitant contributes funds during the accumulation period, they benefit from the potential growth of those funds, which will be drawn upon later when they transition to receiving periodic payments. This distinction sets the accumulation period apart from the income payment phase, which follows and is marked by payments being made to the annuitant.