Maria purchased a deferred annuity 15 years ago and has been making contributions. She now converts it to receive monthly income payments. Which transition has occurred?

Why this is the answer

Every deferred annuity has two phases. The accumulation period is the growth phase: the contract owner makes contributions, earnings accumulate tax-deferred, and no income is disbursed. The annuity period (also called the payout phase or distribution phase) begins when the owner annuitizes — surrendering the contract value to the insurer in exchange for guaranteed periodic income payments. Once annuitization occurs, the owner typically cannot access the lump-sum contract value. For an immediate annuity, the accumulation period is essentially zero — the first payment begins immediately after the single premium is paid. In Texas, the annuity disclosure rule (28 TAC §4.2309) requires the pre-sale disclosure document to explain how contract values can be accessed and what periodic income options are available.