What does the accumulation period in an annuity refer to?

The accumulation period in an annuity is indeed the period during which the annuitant makes payments into the annuity. During this phase, the invested funds grow on a tax-deferred basis, which allows for potentially greater growth over time compared to taxable accounts. This is particularly important for individuals planning for retirement, as it enables them to accumulate savings before they start receiving regular payments.

Additionally, the accumulation period typically involves contributions made by the annuitant, which can occur through a lump sum payment or a series of payments over time. This phase is distinct from the payout phase, where benefits are subsequently disbursed to the annuitant. Understanding this concept is crucial for anyone looking to optimize their financial planning or investment strategies related to annuities.