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Withdrawing Money From Annuities

If the annuitant withdraws the money before the age of 59 1/2, income tax will be due. The withdrawal may be treated as normal income depending on the facts.

How to withdraw money from an annuity:

You can request your money back if you are in the fifth year of an annuity contract.

Annuity withdrawals made before the due date may be penalized. In addition to the income taxes, earnings less the initial amount invested in annuities could also be affected.

It is believed that if your withdrawal limit does not exceed the amount you have been allowed to withdraw, the money “rolls over” into next year. This provides liquidity for the account balance in the year following.

Annuities combine features from both life insurance and investment funds to create a unique product. Annuities are sold by life insurance companies, so outsiders can be quick to criticize their high cost and substandard returns. It can cost a lot to get your annuity money back if your financial goals change. Annuities can be expensive and insurance companies often cover the costs by imposing stiff penalties. Tax penalties are possible.

Withdrawing money from an annuity in retirement?

You may find it easier to sell your payment contracts at a discount to companies that purchase annuities and structured settlement payments if your withdrawal restrictions are too strict.

Feeling in control over your finances can give you a feeling of security. Working with a financial advisor will help you achieve that confidence

Examine your annuity contract and review the section relating to surrender fees. They usually start out high and then decrease over time. You can withdraw your money without having to pay surrender fees. Wait until the expiration date before you take it. Most contracts last seven to nine years.

Which are the biggest disadvantages to withdrawing money from annuities?

An Internal Revenue Service (IRS), may assess a 10% penalty and income tax for funds withdrawn before the due date. The surrender fee will depend on the length of time the owner has been a contract holder. Early withdrawal of a contract is subject to penalties depending on age and circumstances.

Yes. An annuitant may sell part or all of his/her annuity to a company for a lump sum. Annuitant selling their annuity does not incur surrender fees. This is because they are effectively giving up the right to future payments over a set period. There are many factors that will affect the amount of your lump sum.

Requesting an annuity distribution is made from the information provided by your state. The state tax withholding information as well as withholding options for that state are shown.

The insurer may allow you to withdraw funds at your will, however, if you’re under the age of 60 1/2, the IRS can charge you a 10% penalty.