Summerlin Benefits Consulting Q&AAnswer
Oct 15, 2024 - 09:39 AM
The surrender period is the time frame during which you must hold onto an annuity without making withdrawals or you will face penalties. This period typically ranges from 5 to 10 years, depending on the annuity contract. If you need to access your funds during this time, you may incur surrender charges, which can significantly reduce the amount of money you can withdraw.
Surrender charges are designed to protect the insurance company from losing money if an investor exits the annuity early. These charges gradually decrease over time, often starting at a high percentage (e.g., 7% or 8%) in the first year and decreasing annually until the surrender period ends. After the surrender period, you can usually access your money without penalties, but some annuities may still have other fees or restrictions to consider.
While surrender periods ensure the insurer can maintain long-term financial stability, they also limit the liquidity of your investment during that time, which is important to consider if you might need quick access to the funds. Always read the fine print of your annuity contract to understand the specifics of the surrender period and charges.
