Annuities consist of how many basic stages?

Annuities are designed with two basic stages: the accumulation stage and the distribution stage.

During the accumulation stage, funds are contributed to the annuity, either through a lump sum payment or through a series of payments over time. This is the phase where the money grows, potentially earning interest or investment returns based on the terms of the annuity.

Once the accumulation phase is complete, the annuity moves into the distribution stage. This is when the annuitant receives periodic payments from the annuity, which can continue for a specified period or for the rest of their life, depending on the type of annuity chosen.

Understanding these two stages is crucial for individuals looking to manage their retirement income effectively, as they encompass the entire lifecycle of the annuity product—from initial investment to payout.