Can You Get a Loan from an Annuity? (2025 Guide to Annuity Loans)

Let’s break down the real facts behind annuity loans, who might consider one, and most importantly, why it’s almost always a red flag if you find yourself needing one.

What Is an Annuity Loan?

An annuity loan occurs when someone attempts to withdraw money from their annuity before they’re supposed to, essentially borrowing against their own annuity contract.

But here’s the problem: annuities are not designed for loans. That’s not what they’re for. In fact, if you're even asking about an annuity loan, something probably went wrong in how the product was sold or how much money was committed. 

Should You Ever Take a Loan from an Annuity?

Only in the most extreme emergencies. And even then it’s not ideal.

If you're trying to access funds early, it may mean:

• You overfunded the annuity
• You weren't sold a suitable product
• The agent didn’t explain the surrender schedule or liquidity limits

This isn’t just an opinion. It’s about suitability, the foundation of ethical annuity sales. A properly sold annuity shouldn't require you to "get your money back early."

Misleading Sales Pitches About “Tax-Free Income”

You may have heard something like this before:

“You can take tax-free income off your annuity or life insurance just like the Rockefellers!”

Here’s the truth: that’s not income. It’s a loan.

And loans come with:

• Fees
• Interest charges
• Potential future tax consequences

When you borrow from a life insurance policy, or even in rare cases from a certain type of annuity, you're not getting free money you're just getting your own money back, with strings attached.

Why Annuities Are NOT Designed for Loans

Annuities are risk-transfer contracts that are designed for:

• Principal protection
• Income for life
• Legacy planning
• Long-term care support

They are not designed to be ATMs.

If you're treating your annuity like a bank account, you're misusing the product. It's like trying to hammer a nail with a banana; you're using the wrong tool.

The Right Way to Avoid Annuity Loans

We recommend following a basic rule of thumb:

Never put more than 50% of your investable assets into annuities.

By keeping your portfolio balanced, you protect your liquidity and never find yourself needing a loan from a contract that wasn’t built for that.

This means:

• Keep savings, brokerage, and emergency funds separate
• Only use annuities for the contractual guarantees you actually need
• Avoid overcommitting to illiquid contracts

Final Thoughts: Don’t Fall into the Annuity Loan Trap

If you’re in a situation where you're considering a loan from your annuity, that’s a sign that something went wrong in the planning. Either:

• You were sold the wrong product
• You weren’t told the whole truth
• Or your financial situation has significantly changed

None of those are your fault, but they need to be fixed.

We can help you review your current contract, walk through your options, and make sure you have a plan that’s actually built for your goals.