What is the surrender period?
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10% of the accumulation value annually), you may be subject to surrender charges, which are fees assessed on the amount withdrawn.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.
What happens when the surrender period ends?
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.
Once the surrender period is over, you have several options:
- 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.
What are some common scenarios?
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 recommend considering swapping into an income-focused annuity and out of a growth annuity after the surrender period.
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More to read
Growth Annuities 101
Annuities are often touted for their guaranteed income benefits for your later years, but they also offer substantial growth opportunities that make them a compelling alternative to bonds, CDs, money market funds, and even volatile stock portfolios.
Why Is an Application Required for an Annuity?
An annuity application ensures the product aligns with your financial situation by assessing your income, assets, and long-term goals, while offering flexibility for emergencies and household expenses. It also ensures regulatory compliance and protects consumers by verifying the legitimacy of funds and confirming your understanding of the product. Finally, the application helps the issuing company assess risk and formalize the terms of the annuity contract.
Annuities & Liquidity
Annuities are designed to be long-term investments, but they do offer liquidity through penalty-free withdrawals within the surrender period.
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Revise Insurance Group LLC, doing business as Revise Annuity, is a licensed insurance producer authorized to transact in all states. We are domiciled in Illinois under #3002790618 and operate as Revise Insurance Solutions in California under #6012761.