The payout phase is the period when an annuity begins making regular income payments to you after you've either completed the accumulation phase (for deferred annuities) or made your initial investment (for immediate annuities). This is when your annuity shifts from a wealth-building tool to an income-generating one—from savings mode to paycheck mode.

When the payout phase begins depends on your contract and your decisions. With a deferred annuity, you choose when to trigger the payout phase, typically at retirement. With an immediate annuity, the payout phase starts almost immediately, usually within a year of purchase. During this phase, the insurance company begins sending you payments according to the schedule and terms you selected—monthly, quarterly, or annually, and for either a set number of years or for your lifetime.

The payout phase is governed by the choices you made when setting up or annuitizing your contract: the payment frequency and amount, whether payments continue for a specific period or for life, whether payments include cost-of-living adjustments, and what happens to remaining value if you die before the guarantee period ends. Once the payout phase begins, you typically cannot change these terms—your income is locked in. This certainty is exactly what many retirees want, but it's why understanding all your options before entering the payout phase is crucial.