What Are the Two Phases of an Annuity? The Accumulation (or Investment) Phase: This is the phase in which you add money to the annuity and collect interest in some form. A purchased deferred annuity is necessary when this option is utilized. You can purchase one in one lump sum. You can make investments periodically over time. The Distribution Phase: This occurs when you begin distributions from the annuity. Two general options for receiving distributions are available. The first option allows some or all of the money in the annuity to be withdrawn in a lump sum. The full contract value can be “rolled” into another agreement without paying taxes. This is called a 1035 exchange. The second option while using an income rider is to turn on the income
