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have a 7-year surrender period and withdraw 50% of your annuity in year 3, you might face a 7% penalty on the amount withdrawn.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.
Comparing Penalty Withdrawals and Crisis Waivers
|Fees for early withdrawal beyond free withdrawal limits
|Provisions allowing penalty-free withdrawals under specific conditions
|Withdrawals before end of surrender period
|Severe illness, disability, or other life crises
|Percentage of withdrawn amount
|None, if qualifying for waiver
|Impact on Annuity Value
|Decreases due to penalties
|May decrease, but without extra penalties
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.
Request A Quote
Get help or a quote from a licensed financial professional. This service is free of charge.