The distribution phase (also called the payout phase or income phase) is when your annuity transitions from a savings vehicle to an income-generating tool. This is typically when retirees begin receiving the income they've been building toward.
There are several ways to begin the distribution phase:
- Systematic Withdrawals: Take withdrawals as needed while keeping the contract active
- Income Rider Activation: Turn on a guaranteed lifetime withdrawal benefit (GLWB)
- Annuitization: Convert the contract to a guaranteed income stream
Payment frequency options typically include monthly, quarterly, semi-annual, or annual payments. The amount you receive depends on:
- Your accumulated account value
- Your age when payments begin
- The payout option you select
- Current interest rates
- Any guaranteed income rider provisions
For Florida retirees, the distribution phase is particularly advantageous because Florida has no state income tax. You'll only pay federal income tax on the earnings portion of your payments (for non-qualified annuities) or the full payment (for qualified annuities).
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