Annuity Withdrawals


Annuity withdrawals are the contract provision that offers liquidity and allows the owner to regularly withdraw money before a deferred annuity contract expires completely.

Deferred annuities include the fixed annuity, variable annuity, fixed indexed annuity, and long term care annuity.

Liquidity is another common misconception with annuities: you can’t access any of your funds from your annuity account. This simply is not true.

This guide will answer the following questions:

Can you take money out of an annuity?
How to withdraw money from an annuity?
How to get money out of an annuity without a penalty.
When can you withdraw from the annuity without a penalty?
Can I cash out an annuity?
Can I withdraw money from my retirement annuity?
Outside of penalty-free liquidity, an owner can cash out an annuity with or without a penalty, depending on the annuity’s surrender charge schedule.

Can you take your money out of an annuity without a penalty?

Most annuities will allow an annuity owner to withdraw money out of their annuity. The following annuities do not allow for a withdrawal:

Immediate Annuities
Deferred Income Annuities
Medicaid Annuities

Penalty-Free Withdrawal
A penalty-free withdrawal in a deferred annuity is a specific percentage an annuity owner can pocket from the annuity savings without incurring a withdrawal charge. The withdrawal percentage varies by contract, but 10% of the total annuity value seems to be the standard amount of income that can be liquidated each year.

Most deferred annuities offer penalty-free withdrawals that are friendly to Required Minimum Distributions.

Penalty-Free Withdrawal of Original Premium
Annuity withdrawal rules typically offer 2 types of penalty-free withdrawals: Original Premium or Current Account Value.

A penalty-free withdrawal of the original premium allows the annuity owner to withdraw a certain percentage based on the original investment.


You have purchased a $100,000 annuity. There is a 10% penalty-free withdrawal provision of the original premium which is $10,000. This means every year you can pocket up to $10,000 in annuity income payments without a surrender charge. It’s predictable.

A Free Withdrawal of the Account Value
A penalty-free withdrawal of the account value allows the annuity owners to withdrawal a certain percentage based on the current accumulation value.


You have purchased a $100,000 annuity. Let’s say there is no growth nor loss in this policy.  Account balances stay the same.

There is a 10% penalty-free withdrawal provision of the current account value.
In Year 1, you can withdraw up to $10,000. You withdraw the amount of $10,000.
Your current contract value is now worth $90,000.  You want to make another withdrawal next year. In year 2, you can withdrawal up to $9,000.
Because the current account value is now $90,000, and you can withdrawal up to 10% of that amount.

Original Premium Vs. Account Value
If you plan to withdraw from your retirement savings every year during the deferral period, 10% of the original premium is better because of the predictability and the more retirement income you can spend.

If you plan to withdrawal every now and again during the deferral period, 10% of the account value might be a better option because your account value could go up. 

The higher the account balance goes up, the higher the withdrawal amount you will have the following year.

Systematic Withdrawals
Systematic withdrawals from an annuity are the automated withdrawal of periodic income payments (via penalty-free withdrawals) throughout the year instead of pocketing the maximum dollar amount once a year. 

A contract owner can systematically withdrawal annuity income payments via monthly payments, a quarterly payout, or a semi-annual payout.