Personal Finance and Investing

You can take your money out of an annuity at any time, but understand that when you do, you will be taking only a portion of the full annuity contract value.

The default is the five-year rule.

Under it, the beneficiary or beneficiaries have five years to take out the proceeds of the annuity. They can take them out gradually or in a single lump sum anytime up until the fifth anniversary of the owner's death. But even a series of five equal distributions has tax drawbacks.

What are the rules for withdrawing from an annuity?
If you withdraw money from an annuity before you are 59 1/2 years old, you will generally have to pay a 10% early withdrawal penalty. Additionally, you may also have to pay surrender charges if you withdraw money from a deferred annuity before it has matured.

How are annuities distributed to beneficiaries?
After an annuitant dies, insurance companies distribute any remaining payments to beneficiaries in a lump sum or stream of payments. It's important to include a beneficiary in the annuity contract terms so that the accumulated assets are not surrendered to a financial institution if the owner dies.

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