While annuities are designed to provide money over time, you can cash out and get everything back at any time. Here’s what you need to know.
What Are Early Withdrawals?
There are two ways to cash out your annuity — partially, or for a lump sum. In other words, you don’t have to completely close your annuity to receive money from it.
An easy way to do this is to forfeit your payments for a decided amount of time. To understand this, we need to talk about how annuity works. When you purchase an annuity, you’re setting up future income for yourself. You contribute an initial amount (a minimum of between $2,000 and $25,000), it earns interest or is invested over time, then you receive your investment and its earnings in structured payments as income.
So, if you want to cash out your annuity, you can avoid cashing out entirely by giving up some of those future payments. Say you receive $1,500 a month from your annuity. If you want $4,500 now, you can give up three months of your payments later.
You can take more than a few months by cashing out a partial sum. Say you want to take out a downpayment — you can sell the first three years of your annuity payments in exchange for the money.
If you would rather take out a designated amount rather than give up future payments, you can use a lump-sum sale. This way, you can decide the exact amount that works for you and adjust accordingly. Keep in mind that the full cash out process will take about four weeks.
Should You Cash Out?
Cashing out on your annuity is often a desirable option. Are there any reasons why you should avoid it?
Part of the desire of an annuity is guaranteed income — as time progresses, your money earns money itself, and you’re guaranteed income when you’re retired. If you withdraw early, you’re passing up that growth. Taking out $10,000 is worth $10,000 now, but could’ve been worth $15,000 later on.
Here’s another very important thing to consider — fees. Your provider is able to charge you an early withdrawal fee, unless you meet certain conditions. You can avoid IRS fees if you’re aged 59½ years old or older. You can avoid provider penalties if they have it written into your contract.
Know Your Options with Game Changing Benefits
We will walk you through your entire annuity from start to finish. To learn more, call 972-331-1060.