An annuity is a financial product that grows while being funded and provides a regular stream of payouts at a later date. It is a contractual financial product, and is sold by financial institutions whereby the institution accepts and grow funds from an individual and then, upon annuitization, provides a stream of payments to the individual at a later point in time. The period of time when an annuity is being funded and before payouts begin is referred to as the “accumulation phase.”
Once payments start, the contract is in the “annuitization phase.” Annuity payments may be for the life of the annuitant, for a specific number of years, or a combination of the two (for life, but with the guarantee of a certain number of payments even if the annuitant dies prematurely).