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Can You Take Your Money Out of an Annuity?

Hi, I am Stan The Annuity Man, America's annuity agent, licensed in all 50 states and representing pretty much every carrier out there. Today, we will answer a common question: Can you take money out of your annuity?
Types of Annuities and Taking Money Out
In this blog, I’ll talk about different types of annuities and how you can take money out, whether it's interest, lifetime income, or withdrawals. We're going to cover all of that in detail.
Now, let’s skip over SPIAs (Single Premium Immediate Annuities), DIAs (Deferred Income Annuities), and QLACs (Qualified Longevity Annuity Contracts) for now. These are annuitization products where you've already established that income stream. Instead, we'll focus on other types of annuities from which you can take money out.
The main annuity types that allow withdrawals are Multi-Year Guarantee Annuities (MYGAs), Fixed Indexed Annuities (FIAs), and Variable Annuities. With these, depending on the terms, you can typically take out 10% penalty free. We'll go into more detail about these.
Let’s take a closer look at some of these annuities.
MYGAs (Multi-Year Guarantee Annuities)
MYGAs are similar to CDs (Certificates of Deposit). Buying a five-year MYGA will have a fixed interest rate for that term, and most companies will allow you to take out the interest without penalties. However, not all companies offer this, so it’s important to check with me to ensure you’re getting a flexible product.
Fixed Indexed Annuities (FIAs)
FIAs are also similar to CDs. With them, you can take out the earned interest from your accumulated value. If the value increases during the year or the term, you can access that earned interest.
Variable Annuities
With Variable Annuities, you can also access a portion of the accumulated value penalty-free, typically up to 10% annually. This makes them more flexible in terms of access to funds than some other annuity types.
The Withdrawal Process
When you ask, “Can I take money out of my annuity?” The answer depends on the type of annuity you have. Some annuities, like those offering lifetime income streams, have limited liquidity. These are like turning on a water faucet—once it’s flowing, you can’t stop it. If your annuity is designed for lifetime income, you won’t be able to withdraw any additional funds.
However, for annuities with more flexible terms, like MYGAs and FIAs, you can take money out. Typically, companies allow a penalty-free withdrawal of 5% or 10% of the accumulated value each year. Some even allow you to carry over unused withdrawal amounts from one year to the next.
How to Take Money Out of Your Annuity
There are two main ways to withdraw money from your annuity: income and interest.
Lifetime Income
One way is to annuitize the policy. By doing this, you turn your annuity into a lifetime income stream. Alternatively, you can transfer your deferred policy to a Single Premium Immediate Annuity (SPIA) to generate a lifetime income stream. Both of these options give you a predictable income for life.
Interest Withdrawals
You can also take out the interest that your annuity has earned. For example, if you purchase a MYGA or a Fixed Indexed Annuity, most of these products allow you to withdraw interest without penalties.
Flexibility in Withdrawal
If you’re looking for flexibility in withdrawing funds from your annuity, some products allow you to take out more than just the annual 10%. For example, you may be able to carry over your unused withdrawal amount from one year to the next, allowing you to take out a larger portion the following year. However, this is not the case with every carrier, so it’s important to consult with me to ensure the product you choose meets your needs.
Penalty-Free Withdrawals
Most annuities allow a penalty-free withdrawal of 5% to 10% annually. After the surrender period ends—say, after 5, 7, or 10 years—you can withdraw all your funds, including the interest.
For example, if you have a 5-year MYGA, after 5 years, you can take out the full amount, including the interest. The same applies to Fixed Indexed Annuities after their surrender periods.
Understanding Your Options
If you need flexibility, be sure to talk to me. At The Annuity Man, we offer a live MYGA feed, listing products that allow you to take money out easily. But ultimately, we need to have a conversation, so you fully understand the product you're buying.
I’ve developed a method to determine whether you need an annuity, and which type is best for you. It’s based on two questions:
- What do you want the money to contractually do?
- When do you want those contractual guarantees to happen?
Let’s go through some examples:
- If you want income right now, a Single Premium Immediate Annuity (SPIA) is the best choice.
- If you want income starting in seven years, you might look into Deferred Income Annuities (DIAs) or Income Riders.
- If you want principal protection and some interest now, a MYGA is the way to go.
The PILL Acronym
I’ve also come up with an acronym to help you decide if you need an annuity. It’s called PILL:
- P: Principal protection
- I: Income for life
- L: Legacy
- L: Long-term care/confinement care
You may not need an annuity if you don’t need to solve for one or more of these. There’s no G for growth, no M for market, and no S for stocks. PILL covers what annuities can contractually solve for: protection, income, legacy, and care.
The Bottom Line
Before you take money out of your annuity, schedule a 30-minute one-on-one call with us at The Annuity Man. We can go over the details and ensure you’re making a well-informed decision.
Thank you for joining me today, and I’ll see you in the next Stan the Annuity Man blog!