Annuity payout phase is the period when an annuity begins distributing income to the owner or beneficiaries under a selected payout option or income rider. During this phase, the contract transitions from pure accumulation to systematic withdrawals or annuitized payments, and tax treatment is governed by exclusion ratios for nonqualified annuities or required distribution rules for qualified accounts. The payout phase may be irrevocably established by formal annuitization or more flexibly through income riders that preserve some account value and liquidity. Decisions made at the start of the payout phase can be difficult to reverse and have long-term implications for cash flow, taxes, and legacy.

Advisors plan the annuity payout phase alongside other retirement income sources, timing it to fill gaps between Social Security, pensions, and portfolio withdrawals. They help clients evaluate whether to annuitize or rely on income riders and determine the appropriate start date based on longevity expectations and spending needs. During reviews, advisors monitor payout phase performance, ensuring that withdrawals remain within contractual limits and do not jeopardize guarantees. They also coordinate with CPAs to project tax impact as distributions begin. Understanding the annuity payout phase allows advisors to manage the transition from accumulation to income smoothly and intentionally.