Accumulation Period

AAA

DEFINITION of 'Accumulation Period'

1. The phase in an investor's life when he/she builds up his/her savings and the value of his/her investment portfolio with the intention of having a nest egg for retirement.

2. In the context of a deferred annuity, the period of time when the annuitant is making contributions to the annuity and building up the value of his/her annuity account. This is usually followed by the annuitization phase, when guaranteed payments are paid out to the annuitant for a specified period of time (usually the rest of his/her life).

INVESTOPEDIA EXPLAINS 'Accumulation Period'

1. By choosing to defer spending until later in life, individuals create savings that can be invested in the marketplace and therefore grow over time. If they periodically invest money over the duration of their working lives, individuals can create a very lengthy accumulation period during which their savings can grow to substantial proportions.

2. In a deferred annuity, the greater your contributions are during the accumulation period (and the longer the accumulation period is), the greater your income stream will be once you begin the annuitization phase.

RELATED TERMS
  1. Nest Egg

    A substantial sum of money that has been saved or invested for ...
  2. Annuity Contract

    The written agreement between an insurance company and a customer ...
  3. Deferred Annuity

    A type of annuity contract that delays payments of income, installments ...
  4. Annuitant

    1. A person who receives the benefits of an annuity or pension. ...
  5. Rule Of 72

    A rule stating that in order to find the number of years required ...
  6. Compounding

    The ability of an asset to generate earnings, which are then ...
RELATED FAQS
  1. How is a savings account taxed?

    In the United States, the Internal Revenue Service considers interest earned in a savings account to be taxable income. Taxpayers ... Read Full Answer >>
  2. How does a pension income drawdown work?

    While there are similar drawdown plans in the United States, a pension income drawdown plan most commonly refers to a specific ... Read Full Answer >>
  3. How is marginal analysis used in making an investment decision?

    Zero-based budgeting is a simple, effective concept: keep track of every dollar and put all of your money to use. The goal ... Read Full Answer >>
  4. What is the difference between a modified duration and a Macaulay duration?

    Individuals have a handful of options for places to keep the funds they wish to keep guarded from the volatility and risk ... Read Full Answer >>
  5. What is the difference between a bond's yield rate and its coupon rate?

    An annuity is an investment in which a person receives a fixed sum of money annually. Coupon payments received by a bondholder ... Read Full Answer >>
  6. What economic factors affect savings account rates?

    At a basic economic level, the interest rate set on savings account deposits is determined by the relationship between how ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    Explaining Types Of Fixed Annuities

    Learn about this popular retirement tool, its pros and cons and how annuities work to create a guaranteed regular stream of retirement income.
  2. Home & Auto

    An Overview Of Annuities

    These contracts provide a guaranteed income stream. Learn how they work and their benefits.
  3. Options & Futures

    Getting the Whole Story on Variable Annuities

    Variable annuities are another way to save money tax-deferred - but don't jump in blindly!
  4. Options & Futures

    Selecting The Payout On Your Annuity

    Make sure you understand your options for withdrawing your funds from this complex instrument.
  5. Retirement

    Inflation-Protected Annuities: Part Of A Solid Financial Plan

    If you worry about inflation and longevity risks, this may be the investment for you.
  6. Budgeting

    10 Worst And Best Vacation Cities In The U.S.

    The many costs of planning a vacation will put a stress on most people’s finances, but where you choose to go can be what really makes your travel budget.
  7. Savings

    The 5 Countries With The Lowest Interest Rates

    Interest rates in many nations are at record low levels as of May 2015. We look at the five nations with the lowest rates.
  8. Retirement

    What New Grads Need To Do On Their First Job

    It's never too early to start saving aside something for retirement. But what purpose could a retirement account serve when someone just started working?
  9. Retirement

    How To Decode Your Future Retirement Income

    When we get statements showing the account balances for our retirement savings, we just see one big number – the total amount of savings in one account.
  10. Retirement

    10 Retirement Savings Myths That Won’t Go Away

    If you’re confused about the different retirement investment vehicles or don’t know how to save for retirement, it’s important that you do your research.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center