DEFINITION of 'Payout Phase'

The phase in an annuity during which payments are made to the annuitant. These are usually paid on a monthly basis and last for the lifetime of the annuitant. The income received from an annuity by a retired investor is considered taxable income.

BREAKING DOWN 'Payout Phase'

When an annuitant is ready to begin receiving payments from his/her annuity, he/she notifies the insurance company of his/her decision to do so. Actuaries use mathematical models and life expectancy tables to compute payment amounts which will last for the life of the annuitant (the longer you wait, the larger your payments will be). Most annuities have a minimum age at which an annuitant can begin the payout phase without incurring an early withdrawal penalty, and they can also include provisions to continue payments until both the annuitant and his/her spouse are deceased.

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