How Can I Get Money From My Annuity Without Penalty

Can you take all of your money out of an annuity? Yes, but depending on the type, can I get all my money out of an annuity without penalty? There are Single Premium Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, variable annuities, Fixed Index Annuities, Multi-Year Guaranteed Annuities, and charitable gifts annuities. I could keep going.

Some allow you to take money out without penalty if you go to the full surrender charge. Still, some annuities are what's called annuitized, which means, in the Southern lingo, being from the Carolinas, you go outside and turn on the water faucet. You rip the knob off, and the water's flowing; that’s annuitization. That's income flowing forever. With those, you can't get your money out because the money's flowing, the water's flowing. Right? Nod your head. Yes. Side note, I don't sell variable annuities because I don't sell anything that goes down to make them bad. But you can take all your money out of your accumulation value after the surrender charge period ends.

You can't say all annuities are the same because they're not.

Okay. So we're going to talk about a taxation question. I don't give tax advice. I don't give tax advice at all. If you're going to see any tax advice, get it from a CPA or text a lawyer, please. But this is a pretty easy one. So, at what age can you take money out of annuity without penalty? We're not talking about surrender charges because surrender charges still apply. We're not talking about the surrender charge. We're talking about your age. At age 59 and a half or older, there are no penalties. But before 59 and a half, the IRS is like, "Hello? Hello? Hello? Hello? We want our money."

And there's a penalty for taking money out of an annuity, like an index annuity, a multi-year annuity, variable annuity. If you take money out pre-59 and a half, tap on the shoulder; it’s the IRS. So you may be asking yourself, why is the IRS such a wiz? And they're so mad and mean that I'm trying to make money out before I'm 59 and a half? It's because that money's been deferring tax, tax-deferred up until that point. They want you to hold onto it until you're at that retirement age, post-59 and a half.

So the same applies to annuities, Multi-Year Guarantee Annuities, index annuities, variable annuities, and those deferred type annuities. But the same thing applies to your IRA. Taking money out pre-59 and a half same rules. You've been deferring all this time. The IRS and our beloved friends at the government want you to defer past 59 and a half. And if you don't, if you shoot them the middle finger and you say, "Hey, I want my money pre-59 and a half," punk, punk, punk, punk, punk, IRS penalty.

So keeping in mind that 59 and a half rule we just talked about, what is a free withdrawal on an annuity, like a multi-year guarantee, an annuity of the fixed index, annuity, variable annuity, those deferred type annuities? It's not always the same. Most of the time, it's 10% of the accumulation value annually. Not all of them, though. Some are 5%, and then some Multi-Year Guarantee Annuities don’t allow you to take money out. But most of these annuities and annuity types allow you to take out 10% of your money from the accumulation value, the real money from that account every year.

So let's talk about the specific annuity types, and can you get your money out without penalty? I'm not going to go through the IRS thing again, the 59 and a half. You got that. I don't want to hit that anymore. Let's talk about the specific types, and can you get your money without penalty? So we're going to go through them fairly quickly.

Single-Premium Immediate Annuity. That's a pension-type annuity. That's an annuitization type annuity. You can't get your money back, or you can't get your money out. Remember ripping the knob off the water faucet? Okay. The second one is Deferred Income Annuity, which is the sister product, brother product, or cousin product of the immediate annuity. It's an annuitization product. You are, again, ripping the knob off a water faucet. Annuitization, income is flowing; you can't get your money out. Clear? One more time. A Qualified Longevity Annuity Contract that's the newest annuity on the planet. Put on the planet in 2014 to use inside of your IRA as a pension, as an annuitization product, which you can't get your money out of the product. Now, I'm being vociferous on those three because you need to understand when you transfer the risk for those lifetime income streams, for immediate annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts setting up your pension. You're setting up the lifetime income guarantees that income flow will hit your account every month. It's irrevocable, but that's a good thing.

So let's talk about the ones that you can get out, some money, Multi-Year Guarantee Annuities, the CD product, and the annuity version of a CD product. Now, the majority, not all, the majority will allow you to take out, say, either interest, you can just take out the interest, or with some, you can take the interest of 5% of the total accumulation value. And then some will allow you to take interest and up to 10% of the total accumulation value. And then some will say, "No, you can't take an interest, but you could just take the 10%." The bottom line is that when you're looking at Multi-Year Guarantee Annuities, we have a live feed on my site.

The other two, fixed and variable, index annuities are pretty carte blanche. 99% allows you to take 10% of the accumulation value. We've learned that you can't say you hate all annuities. We've learned that you can't say all annuities are the same because they're not. They're not talking about taking money out without penalty.

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.