One of the most common questions people ask about annuities is whether they can take money out once the contract is in place. The answer depends on the type of annuity you own and the rules tied to that product. While some annuities are designed for steady lifetime income, others allow more flexibility when it comes to accessing your funds.
Different Annuity Types and Withdrawals
Not every annuity works the same way. Products like Single Premium Immediate Annuities (SPIAs), Deferred Income Annuities (DIAs), and Qualified Longevity Annuity Contracts (QLACs) are structured for guaranteed income and generally don’t allow you to pull out extra money after the payments begin. Think of these as “locked in” arrangements.
On the other hand, annuities such as Multi-Year Guaranteed Annuities (MYGAs), Fixed Indexed Annuities (FIAs), and Variable Annuities usually give you some access to your funds. In many cases, you can withdraw up to 10% of the account value each year without penalties.
How Withdrawals Work by Annuity Type
- Multi-Year Guaranteed Annuities (MYGAs): These operate much like CDs with a set interest rate for the term. Many providers let you take out the interest earned annually without penalty, though the rules vary by company.
- Fixed Indexed Annuities (FIAs): With FIAs, withdrawals usually come from any credited gains in your account. Since these products are tied to index performance, the amount available depends on how the account value has grown.
- Variable Annuities: These allow access to a portion of your accumulated value, typically up to 10% each year. Because the value is linked to underlying investments, the withdrawal amount can change with market performance.
Lifetime Income vs. Liquidity
When you annuitize a contract or move funds into an immediate annuity, you’re essentially trading control of your principal for guaranteed lifetime income. Once those payments start, you can’t go back and request additional withdrawals. It’s like turning on a faucet that keeps running on a set schedule.
If flexibility matters more to you, then MYGAs, FIAs, and variable annuities may be a better fit. Many of these contracts allow penalty-free withdrawals each year, and some even let you roll over unused amounts, giving you more control in future years.
Penalty-Free Access and Surrender Periods
Most annuities include a surrender period, typically five to ten years, during which withdrawals above the penalty-free amount trigger charges. However, after this period ends, you can usually take out your entire balance without restrictions.
For example, if you purchase a five-year MYGA, you can withdraw interest along the way and then access the full balance—including earnings—once the five years are up. FIAs and variable annuities follow similar rules depending on the contract.
Final Thoughts
Whether or not you can take money out of your annuity comes down to the type of product you own. Some are designed purely for income, while others allow greater flexibility. Knowing the rules of your contract is essential so you can avoid penalties and plan withdrawals in a way that supports your financial goals.
