What is the accumulation period?
The term "accumulation time" is used to describe the time frame, during which the investor attempts to raise money for a long -term goal of savings, such as retirement. Usually the accumulation period lasts throughout the working life of an individual, regardless of whether this individual actively saves funds throughout his career. Although this term can be used in conjunction with any type of investment, it is most often associated with insurance products known as deferred annuity.
Many working adults regularly contribute to pension accounts or savings plan. These posts usually end when retirement, when investors are able to collect from these accounts. In addition to making deposits during the accumulation period, investors also earn money through interest and dividends that they receive for their savings. Although investors continue to gain interest even after retirement age, the storage phase officially ends when theinvestators stop direct contributions to their investmentthe accounts.
Annuity is life insurance products that provide one or more individuals living benefits that include monthly income payments. Investors buy deferred annuity either with a one -off premium payment or with a number of periodic payments. The annuity contract begins with an accumulation period during which the contact owners are invested in mutual funds or fixed interest accounts. This phase can last for the 20 or more years for which the account is proceeding or converted into a lifelong flow of income.
Theoretically, investing in annuity or any other type of tool should grow during the storage phase. However, some investors actually lose money during this period because investments such as mutual funds and stocks are subject to price fluctuations and may lose value over time. If the fund loses the overtaking of the investor's contributions, the accumulation time will result in a net losingThe one for the investor.
Some annuity companies attach insurance riders to annual contracts that protect the interests of investors during the accumulation period. The Annuity Provider usually agrees that the owner of the contract will provide a refund if the contract loses value during the storage phase. This return of the bonus usually takes the form of a number of monthly payments as opposed to a flat -rate amount. In other cases, the annuity companies sell riders who provide the beneficiaries of the ownership of the contract. Imiters of contracts finance this insurance by deducting premium premiums from the insurance contract during the annuity.