Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
Generally, when you buy an annuity you're going to keep it for the life of the contract. Annuities can be cancelled early, but you will likely have surrender charges and certain tax implications involved if you do. What kind of annuity you have may have different penalties for surrendering the annuity early.
If you surrender the annuity before 59 1/2, I believe you can face a 10% federal tax penalty on the value of the annuity.
You should definitely talk it over with your annuity agent before making any decisions so you know what may happen if you surrender the annuity early.
I hope the information is helpful - please feel free to contact me for help or if you have any other questions. Thanks very much.
That is a great question! One of the biggest reasons why an annuity is not suitable for everyone is the fact that your money is tied up for a long period of time. That can be an issue, if you are prone to cash flow problems. You can cancel it, but you will lose a considerable chunk of it to taxes and fees, and may even bump yourself up a tax bracket for the year you cancel the contract. Please talk to your agent, or a tax attorney before you cancel the contract. A better solution, and I use the word "better" guardedly, is to take whatever free withdrawal amount that is available for you, if you are in a cash crunch. This may have an effect on what your annuity earns and pays out , so please consult with your agent first. A better solution yet may be to borrow from your life insurance policy, it's tax free, and will have less consequences. Please feel free to contact me, if you'd like to discuss this privately, okay? Thank you for asking!
.JPG){kind=avatar}
If you surrender the annuity before 59 1/2, I believe you can face a 10% federal tax penalty on the value of the annuity.
You should definitely talk it over with your annuity agent before making any decisions so you know what may happen if you surrender the annuity early.
I hope the information is helpful - please feel free to contact me for help or if you have any other questions. Thanks very much.