Key Takeaway
Annuitization is when an annuity contract is turned into regular payments. An annuity is a financial product that pays someone a lump sum in exchange for regular payments. Annuitization happens at the end of the accumulation phase of an annuity contract. The person can choose to receive payments for a specified period or for the rest of their life.
Annuitization is a term used in the life insurance industry to refer to the process of converting an annuity contract into a series of regular payments. An annuity is a financial product that provides regular payments to an annuitant in exchange for a lump-sum payment or periodic premiums paid to an insurer.
Annuitization typically occurs at the end of the accumulation phase of an annuity contract, which is the period during which the annuitant makes payments to the insurer or invests a lump sum. At the annuitization phase, the annuitant can choose to convert the accumulated value of the annuity into a series of payments.
The payments may be made for a specified period or for the annuitant’s lifetime, depending on the terms of the annuity contract. The annuitization process may also involve selecting a payment option, such as a fixed or variable payment amount, and choosing a beneficiary to receive any remaining payments after the annuitant’s death.
Annuitization is an important aspect of an annuity contract and allows the annuitant to receive a steady stream of income in retirement or to meet other financial needs. The annuitant should carefully review the terms of the annuity contract and understand the options available for annuitization to make an informed decision about their retirement income.
