The surrender period is the length of time you are required to hold your annuity before you can withdraw funds without incurring surrender charges. During this period, if you withdraw more than the penalty-free amount (usually up to 10% of the accumulation value annually), you may be subject to surrender charges, which are fees assessed on the amount withdrawn. These charges typically decrease over time and reach 0% after a certain number of years, depending on your state and the specific terms of your annuity contract. The surrender period is one of the core provisions that allow an insurer to offer the benefits of an annuity.
Annuities typically have a 10-year surrender period, but unlike a bond, the annuity doesn't mature or expire. Rather, you're simply provided more flexibility when the period ends. Most annuities won't forcibly convert to a stream of payments until the owner's 100th or 115th birthday. After the surrender period, you can withdraw all funds from your annuity without incurring surrender charges.
• Leave the Funds Compounding: You can continue to let your funds grow within the annuity. • Take a Partial or Full Distribution: You can withdraw some or all of your funds without facing surrender charges. • Swap into Another Annuity Product: You may choose to transfer your funds into another annuity product offered by the company.
We often see younger customers continue to hold the annuity to benefit from ongoing compounding. With those approaching retirement and in need of income, we may recommend swapping into an income-focused annuity and out of a growth annuity after the surrender period. Of course, we can help you assess the benefits of an annuity replacement in this scenario.
Annuities offer more options and market protection compared to a 401(k), making them an attractive choice for retirement planning. Understanding the rollover process from a 401(k), 403(b), or IRA to an annuity is crucial to avoid penalties and tax implications. This guide provides clear steps to help you navigate the rollover process smoothly.
Annuities can be funded with either pre-tax (qualified) or post-tax (non-qualified) dollars, each offering different tax benefits and considerations. Whether you're rolling an old 401(k) or simply using a checking account, you'll learn all about taxation.
Annuities offer protected growth and tax-deferred advantages, providing a safe way to accumulate wealth with less exposure to market volatility. In contrast, 401(k)s and 403(b)s offer greater investment flexibility and potentially higher returns, supplemented by employer contributions.
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