During the Accumulation Period, Who Can Surrender an Annuity?

Shawn Plummer

CEO, The Annuity Expert

Definition of Accumulation Period

The accumulation period in an annuity is the phase where the annuity owner makes payments into the annuity, and these funds accumulate interest. This period lasts until the annuity is converted into a stream of payments (annuitization).

During The Accumulation Period, Who Can Surrender An Annuity

Who Can Surrender an Annuity During This Period?

  1. Annuity Owner: The individual or entity that owns the annuity contract has the right to surrender the annuity during the accumulation period.
  2. Joint Owners: If the annuity has joint owners, they must usually agree to the surrender.
During The Accumulation Who Can Surrender An Annuity

Surrender Charges

  • Surrender Fee: Many annuities have surrender charges if the annuity is surrendered before a certain period, typically 5-10 years.
  • Fee Decrease Over Time: The surrender fee often decreases annually.
How Do Interest Earnings Accumulate In A Deferred Annuity

Tax Implications

  • Tax on Earnings: Surrendering an annuity can lead to taxes on any earnings.
  • Additional Tax for Early Withdrawal: If under 59½, there may be an additional 10% tax on earnings.

Examples of Surrender Situations

  1. Financial Need: The owner needs immediate cash for an emergency.
  2. Better Investment Opportunities: The owner finds a more lucrative investment.

Key Considerations for Surrendering an Annuity

ConsiderationDetails
Owner’s RightOnly the owner(s) can initiate surrender
Surrender ChargesFees for early surrender, decreasing over time
Tax on EarningsTaxes on the interest or investment gains
Additional TaxPossible 10% penalty for those under 59½
Joint OwnershipBoth owners must agree if jointly owned
How Soon Can The Benefit Payments Begin With A Deferred Annuity

Conclusion

Surrendering an annuity during the accumulation period is primarily the right of the annuity owner or joint owners. It’s important to consider potential surrender charges and tax implications. Understanding these factors ensures a well-informed decision.

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Frequently Asked Questions

When should you surrender an annuity?

You may consider surrendering an annuity if you have explored all other options, such as transferring or exchanging it, and determined that surrendering is the most suitable choice for your financial situation.

What happens if you surrender an annuity early?

You may incur surrender charges and tax implications if you surrender an annuity early. The specific consequences depend on the terms of the annuity contract and your circumstances.

What happens if an annuity dies during the accumulation period?

Suppose an annuity owner dies during the accumulation period. In that case, the remaining value of the annuity typically goes to the designated beneficiary or the owner’s estate, depending on the annuity contract terms.

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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