5 Secrets on Early Withdrawals from Annuities

Worried that your money is locked up when you are in an annuity? Well, this is the key!

People fear that money put into deferred annuities is untouchable for several years. Realistically, annuities are designed to remain invested and grow over time. But that doesn’t mean it’s locked in Fort Knox. There is always access to your money. At worst, early withdrawal of your investment will result in a small surrender charge; but, even that is not always true. Below are several methods on how you can access your money, even when it is in a deferred annuity.

“Free Withdrawal” Feature– This is when the contract allows one or more free withdrawals during the course of your investment. Often these withdrawals are limited by a set percentage, agreed upon at the signing of the contract. This feature relieves some of that fear that your money is locked away. So when choosing an annuity, make sure this is one of the many features you look for that will allow your investment to be more accessible during the contract period.

Annual withdrawal exemptions- Most annuities allow the contract holder to withdraw a set percentage of their investment every year on the anniversary date of the contract. Annual withdrawal percentages vary with each contract, but often offer a free withdrawal each year.

Situational exemptions- Many contracts offer free withdrawals of your entire investment if you fall onto hard times. For example, many annuities will offer a free withdrawal if the contract holder suffers serious medical issues, needs to go into a nursing facility, or other life changing events. It is important to review these options and know when you might be eligible for this feature if the time ever comes.

Diminishing Surrender Charge- Most annuities have a diminishing surrender charge feature, meaning every year that you stay invested the surrender charge penalty lessens. So, the longer you can manage to keep your money invested, while only using the allowed withdraws explained in this article, the less the potential surrender charge will be.

Free Look Provision- Many states have laws allowing the contract holder to opt out of the contract and retrieve all of their money within a certain time frame of signing the contract. This feature allows consumers extra time to review their contract and see how it works, free from the risks of paying surrender penalties.

It is especially important in financial management to do your homework on available investments. You shouldn’t jump into any investments, nor dismiss any investment opportunities, without first doing some research.

First Senior Financial Group provides a free consultation to help you manage, strategize and plan your retirement and the handling of your annuities.

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