How to Get Out of Your Annuity: Tips and Tricks

Shawn Plummer

CEO, The Annuity Expert

This guide will go over the various methods to cancel or transfer your annuity contract, least painfully.

I Have an Annuity And I Need Cash Now!

If you’re stuck in an annuity and want out, you’re not alone. Annuities are notorious for being difficult to get out of, but there are ways to do it. This guide will go over the various methods to cancel or transfer your annuity contract, least painfully. First, most annuities are long-term contracts. If you’re not ok with committing to at least 2 years in a contract, don’t buy one.

Free Look Period

Annuities and life insurance have a short time for new contract owner to change their minds and cancel the policy. This period is called the free look period. If the policy owner decides to cancel the policy during the free-look period, the insurance company will refund the insurer’s entire premium. However, if the policy owner decides to cancel beyond the free look period, the insurer must pay surrender charges and penalties.

The free look period varies with each policy and is a specified number of days, typically 30 days in length. The period starts on the first day the policy owner receives the policy. The free look period’s length is displayed on the policy’s first page.

Immediate Annuities

The notorious SPIA has always been the poster child for clients being stuck in an annuity contract. The singular function of a SPIA is trading your lump sum of cash into a guaranteed stream of income, so in most cases, it’s no one’s fault except your own.

So how do we get out of it?

Well, you don’t, unless there is a Return of Premium feature, which is rare.

So what’s the other route?

Sell it on the Secondary-Market.

Some firms will purchase your annuitized contract in exchange for a lump sum of money.

Just search “Buy My Annuity” on your preferred internet search engine, and there will be plenty of options to choose from.

Deferred Annuities

Most deferred annuities are pretty straightforward on how you can cancel your contract because of a surrender schedule that is put in place to see what your penalties will be upfront.

Fixed, Fixed Indexed, Registered-Linked, and Variable Annuities are considered deferred annuity contracts.

So how do we take money out of the annuity painlessly? When closing out an annuity, there are 3 options:

  1. Surrender the annuity, and take the penalty according to the surrender schedule.
  2. Pocket the maximum annual penalty-free withdrawal amount each year until the policy is exhausted.
  3. If you’re transferring your annuity for another annuity, find an annuity with a premium bonus to make up the surrender charge from your current annuity.

Two-Tiered Annuity

Another annuity contract that gets a bad reputation. Luckily, two-tiered annuities are not in production currently.

If you are in one of these contracts, there are a few options if you haven’t already annuitized yet.

If you are taking income from the contract, refer to the Immediate Annuity solution.

  1. Surrender the policy, take a huge loss. Move on.
  2. Pocket the maximum annual penalty-free withdrawal amount each year until the policy is exhausted (if available).
  3. Annuitize the contract on a period certain basis, and select the least amount of time to get your money back.
  4. Sell your contract to a secondary-market firm.

Tip* Before you make any quick decisions, call the insurance company first. If your contract has a MVA, and we are in certain market conditions, you might be able to get out of your contract with minimal damage.

Deferred Income Annuity and QLAC

If you haven’t annuitized the deferred income contract, you should be able to get your money out, similar to a deferred annuity.

If you have annuitized, you can sell your contract.

Medicaid Annuities

You can’t get out of your Medicaid annuity. When you purchase one of these contracts, you give your rights to the assets, which means you can’t sell them.

Income Riders

If you’ve purchased a deferred annuity with an income rider, the same cancellation rules apply as deferred annuities in general.

Look at your surrender schedule, or call the insurance company.

Exercise your options from there.

If you’re transferring your annuity into another annuity contract, don’t be distracted by a “bell and whistle.”

Ensure your financial situation will be improved all around in the new annuity, meaning you receive more income, a long-term care feature, better growth, etc.

Annuity Liquidity At A Glance

Fixed Index
Cancellation AllowedYesYesYesNoYes/No
Penalty-Free WithdrawalsYesYesYesNoNo
Health-Related WaiversYesYesYesNoNo
Return of PremiumNoYesYesNoNo

When Can You Cash Out An Annuity?

An annuity can be cashed out an annuity at any time before annuitizing the contract. If the annuity is cashed out before the deferred annuity’s term has been met, a surrender charge can be applied. Generally, the annuity can be cashed out without a penalty after the term has been completed. Immediate annuities can not be cashed out. Annuitized payments can not be cashed out.


Since most annuities are long-term contracts, it can be difficult to get out of your contract and not lose an arm and a leg.

With that said, there are a few methods to go about canceling or transferring your contract efficiently.

Do your homework first. Figure out the best route to go, then execute.

If you have questions about your annuity contract, feel free to contact us.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

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

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