The specific day that an annuity goes from the pay-in period to the pay-out period; should not be before the annuitant is 59½ to avoid a 10% tax penalty.

The specific day that an annuity goes from the pay-in period to the pay-out period; should not be before the annuitant is 59½ to avoid a 10% tax penalty.

• A. Annuity period
• B. Accumulation period
• C. Date of annuitization
• D. Flexible premium

Answer: (C)

The key idea is identifying when an annuity begins paying out after being funded. That moment—the date you start the regular distributions and the contract moves from accumulating funds to providing a steady payout—is the date of annuitization. It’s the formal switch from the pay-in (accumulation) phase to the pay-out (distribution) phase, and it sets up the chosen payout method (life, period certain, etc.). The 10% tax penalty before age 59½ is a consideration for early withdrawals taken during the accumulation phase, but once annuitization occurs, you’re in the payout stream rather than making early withdrawals from the saved funds. The other terms describe the phases or features of the contract but do not denote the switch to payouts.

The key idea is identifying when an annuity begins paying out after being funded. That moment—the date you start the regular distributions and the contract moves from accumulating funds to providing a steady payout—is the date of annuitization. It’s the formal switch from the pay-in (accumulation) phase to the pay-out (distribution) phase, and it sets up the chosen payout method (life, period certain, etc.). The 10% tax penalty before age 59½ is a consideration for early withdrawals taken during the accumulation phase, but once annuitization occurs, you’re in the payout stream rather than making early withdrawals from the saved funds. The other terms describe the phases or features of the contract but do not denote the switch to payouts.