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If you take money out of an annuity, you may face a penalty or a surrender fee, also known as a withdrawal, or surrender charge. Annuity contracts include surrender charges to make up for the insurance companys loss if you choose to withdraw before they can earn interest on your principal.
The IRS enforces strict rules on retirement plans to discourage the use of these funds for anything other than normal retirement, and qualified annuities are no exception. The agency will assess a 10 percent penalty on annuity owners who surrender their contracts prior to the age of 59 .
How to Get Out of an Annuity Free Look Provision. If your annuity is a recent investment, you may be able to get out of it during the contracts free-look period. Return of Premium Rider. Similar to life insurance offerings, annuity contracts can also include a return of premium rider. 1035 Exchange. Cashing Out.
Immediate annuities provide a guaranteed income stream for life, but they do not offer annuity withdrawals for regular liquidity. Annuitized payments do not offer withdrawals either. This means that once you start receiving payments from an immediate annuity, you cannot stop or change the amount you receive.