Annuitization is the step of converting your annuity's balance into a stream of regular income payments, usually for a set number of years or for the rest of your life. Once you annuitize, you generally trade the lump sum for the guaranteed payments in return.
In plain terms: Switching your annuity from a savings balance into a paycheck.
Annuitization is like turning a reservoir into a steady, metered stream. You give up the big pool of water all at once in exchange for a reliable flow you cannot outpace. The insurer calculates the payment from your balance, your age, and the payout option you choose. Because the choice is usually permanent, annuitizing is a decision to make deliberately, often with an advisor, not a default.
Annuitization with a lifetime payout option can create income designed to last as long as you live, backed by the issuing insurer's claims-paying ability, which addresses longevity risk. The trade-off is giving up access to the lump sum, so it fits money you have earmarked for income, not money you may need in a hurry.
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