What happens during the accumulation period of a fixed annuity?

During the accumulation period of a fixed annuity, a fixed interest rate is guaranteed to the policyholder. This period is essential for growing the value of the annuity through interest credited on the contributions made. The fixed interest rate provides a level of stability and predictability for the policyholder, allowing them to plan their finances with confidence, as they know exactly how much interest will be earned on their contributions over time.

The accumulation period serves as a time for the policyholder to make premium payments and watch their investment grow at a steady rate. At the end of this period, the total accumulated value can be used to determine the amount of income the policyholder will receive during the annuity's payout phase. The predictability of a guaranteed fixed interest rate is a key defining feature of a fixed annuity, making it an attractive option for those seeking conservative investment growth.