Accumulation period

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Accumulation Period

1. The period of time in which someone saves, especially for retirement. Generally speaking, the longer the accumulation period, the more one saves.

2. In annuities, the period of time in which one contributes to the annuity. Depending on the type of annuity, taxes may be deferred during the accumulation period. Generally speaking, the longer the accumulation period and the more one contributes to the annuity, the greater the resulting income stream.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Accumulation period.

The accumulation period refers to the time during which your retirement savings accumulate in a deferred annuity.

Because annuities are federal income tax deferred, all earnings are reinvested to increase the base on which future earnings accumulate, so you have the benefit of compounding.

When you buy a deferred fixed annuity contract, the company issuing the contract promises a fixed rate of return during the accumulation period regardless of whether market interest rates move up or down.

With a deferred variable annuity, the amount you accumulate depends on the performance of the investment alternatives, known as subaccounts or separate account funds, which you select from among those offered in the contract.

At the end of the accumulation period, you can choose to annuitize, agree to some other method of receiving income, or roll over your account value into an immediate annuity. The years in which you receive annuity income are sometimes called the distribution period.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
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