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Will I Be Charged a Fee If I Withdraw Annuity Assets Too Early?

Why this is important: Surrender fees are sizable charges tacked onto the back end of the annuity contract—often starting at 7% and declining yearly toward zero (see table below for a hypothetical demonstration). But they can be higher.

While most annuities advertise free annual withdrawals, know what you’re buying. You may be able to withdraw a small percentage each year without paying a penalty, but if you have unforeseen income needs, you may be penalized.

If you need access to the entire amount once you’ve purchased the annuity, or if you simply decide it wasn’t the right choice after all, unwinding the contract can be costly.

And if you purchased a fixed annuity, in addition to an early surrender charge your account value might also include a Market Value Adjustment, which can be negative during a rising interest rate environment.

So before you decide an annuity is right for you, make sure you can either commit to keeping the annuity locked up for its entire contract length, or can bear the penalty for an early exit.

Hypothetical Annuity Surrender*

*This example is provided for illustrative purposes only. It is not intended to predict actual expenses of any investment, which will vary.

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