Penalty Withdrawals Vs. Crisis Waivers In An Annuity Contract

Shawn Plummer

CEO, The Annuity Expert

What Are Penalty Withdrawals in Annuity Cash Outs?

Penalty withdrawals refer to the fees incurred when you withdraw money from an annuity before the specified time in your contract. These penalties, also known as surrender charges, vary depending on the annuity provider and the terms of your contract. Typically, annuities have a surrender period, during which any withdrawals above a certain percentage incur a penalty.

Example: If you have a 7-year surrender period and withdraw 50% of your annuity in year 3, you might face a 7% penalty on the amount withdrawn.

What Are Crisis Waivers in Annuities?

Crisis waivers are provisions in some annuity contracts that allow you to withdraw funds without penalties under specific circumstances. These circumstances usually include severe illness, disability, long-term unemployment, or other significant life events.

Example: If you become critically ill and your annuity contract has a crisis waiver for health emergencies, you can withdraw a portion of your funds without facing surrender charges.

Penalty Withdrawals And Crisis Waivers For Annuities

Comparing Penalty Withdrawals and Crisis Waivers

FeaturePenalty WithdrawalsCrisis Waivers
DefinitionFees for early withdrawal beyond free withdrawal limitsProvisions allowing penalty-free withdrawals under specific conditions
Typical ConditionsWithdrawals before end of surrender periodSevere illness, disability, or other life crises
ChargesPercentage of withdrawn amountNone, if qualifying for waiver
Impact on Annuity ValueDecreases due to penaltiesMay decrease, but without extra penalties

Conclusion

When considering an annuity cash out, it’s crucial to understand the implications of penalty withdrawals and crisis waivers. Penalty withdrawals can significantly reduce the value of your annuity, while crisis waivers offer a way to access funds without additional costs in specific situations. Weigh these options carefully based on your circumstances. Contact us today for a free quote.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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