Annuitize is a process by which an individual converts from the accumulation stage to the pay out stage of an annuity contract. This is accomplished by exchanging accumulation units for annuity units. Once a payout option is selected it cannot be changed.
Applying "Annuitize" to Securities Exams:
When an investor who has contributed to annuity contract reaches retirement age the investor will convert the annuity contract from the payment or deferred stage to the payout stage. When the investor converts the contract the investor exchanges their accumulation units for annuity units and is said to have annuitized the contract. The value of the account, the payout option selected and the age and sex of the annuitant all determine the amount of the monthly payment. The annuity company sets an AIR or assumed interest rate required to keep the monthly payments consistent for the life of the annuitant.