Taking Early Withdrawals From an Annuity
Investing in an annuity contract with an insurance company can be an effective way to create a regular income during your retirement years. If you decide that you'd rather have access to some of the money before you reach retirement age, you always have the option of withdrawing money from the annuity early. When you take this approach, you must keep in mind that you'll lose some of the money to penalties and fees.
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Instructions
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Contact your insurance company. Ask the company about its process for taking an early withdrawal from your annuity.
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Review the terms of your annuity regarding early withdrawals. Most annuities charge surrender fees if you take money out within the first six to eight years. These surrender fees can be substantial. For example, you may pay as much as 20 percent in surrender fees. Make sure that you still want to take the money out after reviewing the policies of your annuity.
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Complete the necessary paperwork or online forms required for taking a early distribution from your annuity. Some insurance companies have an online form that will allow you to get the process started. Others require you to fill out a form in person or mail it in. You'll provide personal information such as your name, Social Security number and address as well as the amount that you want to withdraw.
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Wait on the insurance company to send you the money. After you turn in the necessary paperwork, the insurance company will process the form and cut you a check in the amount requested. The surrender fees will be taken out of the amount you withdraw.
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Tips & Warnings
Be aware that taking money out of an annuity before you reach age 59 1/2 results in tax penalties as well. Any earnings that you withdraw will incur have a 10 percent penalty.
Taking money out of an annuity early can cause you to lose a large percentage of your funds. Be sure that you want to lose that much money before taking an early distribution.
