Most annuities allow you to withdraw either your interest earnings or up to 15% per year without a penalty. If you want to withdraw more than this, most annuities have a surrender charge — a penalty for making an early withdrawal above the free withdrawal amount. Typically this surrender charge decreases over a period of time, such as seven years.
For investors who may need spur-of-the-moment access to their money, there are annuities without surrender charges (“no-surrender” or “level load” annuities) — these annuities have no penalty or charge for early withdrawal. (However, be aware that even with a no-surrender annuity investors under the age of 59 ½ are subject to a 10% federal excise tax as well as ordinary income taxes on any gains. You can avoid any taxes or penalties, however, by making a 1035 Tax-Free Exchange to another annuity, regardless of age.)
Note that no-surrender annuities do not come with bonuses.
There are a few other things to be aware of when exploring no-surrender annuities. First, no-surrender annuities typically pay the broker a lower upfront commission — a broker or agent may not volunteer that no-surrender annuities are available to you, so ask! Second, be certain to compare the annual fees and track record of the fund compared with the company’s standard product with the surrender charge. If you have any questions, you can always call an licensed financial professional to make sure that you pick the best annuity to meet your needs.