Yes, you may be able to take all of the money out of a fixed deferred annuity during the accumulation period, but doing so can come with costs. If you withdraw the full cash surrender value, you end the annuity and usually give up any right to future income payments from that contract.
The NAIC explains that if you take all of the value out and surrender, or terminate, the annuity, you may pay a surrender charge. This charge is often a percentage of the amount withdrawn, and it usually goes down over time until the surrender charge period ends. If the annuity has a stated term, you may also get a short window at the end of that term to decide whether to renew or surrender. If you surrender during that window, you usually will not have to pay surrender charges. If you renew, surrender or withdrawal charges may start over.
Some contracts also include a market value adjustment (MVA). If interest rates are different when you surrender than when you bought the annuity, the MVA may increase or decrease the amount you receive. In general, if interest rates are lower when you withdraw than when you bought the annuity, the MVA could increase the amount you can take. If interest rates are higher, it could reduce the amount.
There may be situations where charges are reduced or waived. The NAIC notes that some annuities allow limited free withdrawals, often up to a set percentage each year, and some waive charges for events such as death, confinement in a nursing home, or terminal illness. Some contracts also have a bail-out option that allows surrender without a charge if the company’s current interest rate falls below a certain level.
Taxes can also matter. The NAIC says you will generally owe ordinary income tax when you take money out, and you may also have to pay a 10% tax penalty if you withdraw before age 59½.
Before cashing out, read the contract and disclosure carefully and ask how surrender charges, any MVA, and taxes would affect the amount you actually receive.
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Educational content provided by Jeffrey Scott McLeod, LUTC, National Insurance Producer License #558629. This is for informational purposes only and is not a recommendation to buy or sell any annuity. Guarantees are subject to the claims-paying ability of the issuing insurance company. Always consult your own advisor and read the full NAIC Buyer’s Guide. For residents of your state.
Source: © 2025 National Association of Insurance Commissioners (NAIC). Reprinted with permission. Further reprint or distribution strictly prohibited without written permission of NAIC.
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