Most deferred annuities let you withdraw a set portion of the contract value each year — often up to 10% — without incurring a surrender charge. This provision gives you some liquidity even during the surrender period.
Withdrawals may still have tax consequences, and amounts above the free-withdrawal limit can trigger surrender charges. Taxable gains withdrawn before age 59½ may also face an IRS penalty.
Example
On a $100,000 annuity with a 10% free-withdrawal provision, the owner can take up to $10,000 in a year without a surrender charge.
This definition is for general educational purposes only and is not financial, tax, or legal advice. Tim Hartle is an independent insurance professional. Annuity guarantees are subject to the claims-paying ability of the issuing insurance company and are not FDIC insured. Rules and product features vary by situation and by state. Please consult a qualified advisor about your own circumstances.