Can You Take Your Money Out of an Annuity?

The question is, can you take money out of your annuity? Hi, I'm Stan The Annuity Man, America's annuity agent, licensed in all 50 states representing pretty much every carrier out there.

In this blog, I'll discuss the different types of annuities and how you can withdraw money from them, whether it's interest, lifetime income, or withdrawals. We'll cover all of that in detail.

Today, we're discussing how to withdraw money from annuities. We'll skip SPIAs, DIAs, and QLACs because those are annuitization products, and you've already established that an income stream is coming. So, let's discuss the other types of annuities from which you can withdraw money.

Multi-Year Guarantee Annuities, MYGAs, Fixed Indexed Annuities, FIAs, and Variable Annuities. You can take out 10% penalty free with most of them, Variable Annuities and Indexed Annuities.

Client Example

I got a call from Chester the other day, and he goes, "Hey Stan, can I take money out of annuity?" That's a broad question, Chester. The answer is maybe, depending on the type of annuity that you purchase. Some annuities are principal protection products. You can peel off the interest, you can cash it out, those types of things. Some are irrevocable lifetime income streams.

So, think about it as you walk outside to your house; as you were a kid, you had the house, you had the water spigot, and you ripped the knob off the water spigot. Spigot's kind of southern. Water faucet, for you cultured people out there. And the water's just flowing and flowing and flowing. That's an irrevocable lifetime income stream annuity, meaning that once that income stream's coming, it will come for the rest of your life if you set it up for lifetime income. Period. There's no liquidity.

The answer to Chester's question, which is, "Can I take money out of my annuity?" It depends on the annuity type. The answer for some is yes, and the answer for some is no, which leads to the common point that you need to talk to me because I will tell you which one. You need to be aware of illiquidity, which is a really good word. Illiquidity is the illiquidity of some annuities compared to others. You need to know the benefits and the limitations, as well as the good and the bad aspects of the annuity.

If it sounds too good to be true, it is every time, right? Not your head. Of course, it is. That's the reason we need to talk. But the answer is some are illiquid, and some are liquid, and it depends on what your specific goals are, and we'll match you up with that product.

Lifetime Income

Okay, so you already have an annuity; how do you get money out of it? One of the ways is income, lifetime income. There are two ways to do that. The first is your policy; you can annuitize that policy or, in other words, create a lifetime income stream. Or you can take the policy that you have, that deferred policy, and you can transfer it, non-taxable event, to a Single Premium Immediate Annuity and get a lifetime income stream that way as well.

Taking Out the Interest

The second way to take money out of an annuity is just taking out the interest. Multi-Year Guarantee Annuities, the annuity industry's version of a CD, is a way to do that. So, if you buy a five-year, Multi-Year Guarantee Annuity with a specific interest rate, most companies will allow you to take out the interest. Not all, but most are. Fixed Index Annuities, another CD-type product, you can take out that earned interest; whatever accumulation value has been earned for that year or two-year option, you can also take that out.

Annuity Types

Let's talk about the annuity types that allow you to withdraw money, which, for many people, they want. They want their cake and eat it, too, right? But with some, like Multi-Year Guarantee Annuities, which is the CD version, and the annuity version of a CD, some companies allow you to take a free withdrawal of that money. Typically, it's either five or 10% annually of the total accumulation value. Most of them let you do that, but not all of them.

Remember, in the annuity world, they're commodity products. There are tons of carriers. I represent pretty much everyone out there. If you said to me, "Stan The Annuity Man, America's annuity agent, I want to make sure that if I need money and I want to withdraw money, I want to do it penalty free." I will make sure that's the products that I show you and shop all carriers for that. So, that's Multi-Year Guarantee Annuities. Variable Annuities and Fixed Index Annuities, pretty much all; you can't say all but 99% allow that 10% or 5%. Typically, with an Index Annuity and Variable Annuity, it's a 10% free withdrawal of the accumulation value every single year.

Be Specific

Now, to throw a wrench in the engine a little bit, with some of these companies, you don't have to take the money out in year one, and then the second year, you can take 20% out, but there's not a lot of them out there. Here's the bottom line with withdrawal. You have to be specific with me. What do you want?

If you don't need the money, lock it in and get the highest contractual guarantee. You're not going to take money out. But if you want that flexibility of taking money out, let me know. Typically, it's a 5% or 10% free withdrawal, which means no penalties for taking the money out. Remember this, this is another vital part of the withdrawal provision. You can withdraw all the money at the end of the surrender charge period. So, let's just take a couple of examples. A Multi-Year Guarantee Annuity. That's a CD, the annuity version of a CD. Let's say you bought a five-year Multi-Year Guarantee Annuity. At the end of five years, the withdrawal provision is all of it. You can take it all with interest. It's the same thing if you bought an Indexed Annuity; that's a ten-year surrender charge. At the end of that 10 years, you can take all of it.

But I think a lot of you're just worried about, "Hey, I'm locking the money in for five years," or, "I'm locking the money in for 10 years," or, "I'm locking the money in for three years," or, "I'm locking the money in for seven years, but Stan, the Annuity Man, America's annuity agent, I need to make sure that if me and Marge," or, "me and Bill need to take money out, we can." I can take care of that for you. At The Annuity Man, there's a live MYGA feed, and we list the products from which you can take money. But at the end of the day, we need to have that conversation so that you understand what you're buying.

The 2 Questions

I've come up with two very unique ways to determine if you need an annuity, and if you do, what type works best contractually for you? The first two questions that I've come up with, every single person that calls Stan The Annuity Man, I encourage you to do that, go to The Annuity Man and set an appointment to speak with us. But I ask them two questions. First, what do you want the money to contractually do? And the second is, when do you want those contractual guarantees to happen?

Examples

Let's take those two questions, and I'll give you a couple of examples. What do you want the money to contractually do? I want income? Second question, when do you want those contractual guarantees to start? I want income to start now. Well, then, we've determined that you might need a Single Premium Immediate Annuity.

Let's do it again. What do I want the money to contractually do? Income. When do I want those contractual guarantees to start? Seven years from now. Okay, we've narrowed it down to two product types: Deferred Income Annuities, which could be a QLAC as well, and Income Riders. Okay? From those two questions, I'll quote all carriers to find the highest contractual guarantees, and then we will discuss them.

Let's do it again. What do you want the money to contractually do? I want to protect the principal and get some interest. When do you want those contractual guarantees to start? Now. Okay, great. That is a Multi-Year Guarantee Annuity. That's the annuity industry's version of a CD. See how simple that is? Let's do it again. What do you want the money to contractually do, and when do you want those contractual guarantees to start?

The P.I.L.L

The second thing I've come up with is an acronym called PILL. P stands for principal protection, I stands for income for life, L stands for legacy, and the other L stands for long-term care/confinement care. Let's do it again. Principal protection, income for life, legacy, long-term care/confinement care. You do not need an annuity if you do not need to contractually solve for one or more of those items in the PILL acronym. There's no G for growth, there's no M for market, there's no S for stocks. It's PILL, principal protection, income for life, legacy, long-term care/confinement care. You can contractually solve for those four items using annuities.

Let's do it again, two questions. What do you want the money to contractually do? Then, use the PILL, principal protection, income for life, legacy, and long-term care/confinement care. That's it. That's how to determine if you need an annuity and what type. And even better than that, if you don't need an annuity.

Before you take money out of an annuity, I encourage you to go to The Annuity Man and schedule a time to speak with us one-on-one for 30 minutes so we can go over the details and make an informed decision. You can also go to my site and get the books. You can download them for free. I've written six owner's manuals on all annuity types. You can also run your own quotes, which is excellent as well.

One more thing: I have a podcast called Fun With Annuities on all major platforms. I encourage you to listen to that. The replays are on my site as well. I appreciate you listening to me today. I'll see you on the following Stan The Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.