What Happens If I Surrender My Annuity?
Quick money may not be the best way to handle your finances, but before you decide ask the question, “What happens if I surrender my annuity?”
When people are in a cash crunch they are often times quick to jump into a financial decision that they just might regret. Before you decide to cash out of an annuity you might just want to ask, “What happens if I surrender my annuity?”
What happens if I surrender my annuity?
When you surrender an annuity, especially if you do this during the first five to seven year’s the policy is in effect you will necessarily need to pay some surrender fees. Those fees can be as high as 15% of the value of the annuity. You might also be subject to other fees as well such as early withdrawal, which can be 10%.
How are taxes treated with surrender of an annuity?
If you are surrendering your annuity before the age of 59 ½ you will be liable for a 10% penalty on that portion of the annuity that is taxable. You will also be paying taxes on the amount of the annuity because it is considered income.
Are there waivers to fees for surrender of an annuity?
You will need to check your particular annuity to find out if it contains any waivers. Waivers will sometimes allow you to withdraw part or all of your money from an annuity in cases of disability, confinement in a nursing facility, or a medical condition that may be life threatening.
Other options when surrendering an annuity
You may want to roll your annuity into an immediate annuity which will pay you a monthly income rather that complete surrender, which could cost you more than you can afford, and answer the question, “What happens if I surrender my annuity?”
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