Tell Me About Flexible Annuity Withdrawals

Annuities are one of the most flexible savings and investment options available today. They provide flexibility not only in terms of payment but also in terms of withdrawal. Unlike 401(k)s and IRAs, which requires you to begin making withdrawals at age 70 1/2, you have much more flexibility with annuities.
Annuity provides high degree of flexibility for receiving payments; a brief description of which is as follows. When you decide to begin receiving payments, you can usually select one of the following methods like:- lump sum distribution which means a one-time payment, periodic distributions in which you can take money only when you need it, systematic distributions means that fixed or variable amount is sent to you at regular intervals.

If you decide to opt for a regular stream of payments, many insurers will allow you to have annuity payments last for a set amount of time for example 10 or 20 years. Many contracts also allow you to receive payments for as long as you and your spouse live. So in a way it provides a predictable source of income. Giving more flexibility some annuities are designed to be immediate annuities. Immediate annuities have no accumulation phase whatsoever. They begin paying you in regular increments the moment you purchase the contract.

Now focusing entirely on the withdrawals, annuity withdrawals is not some thing that is encouraged by the companies but still their exist provisions to meet the emergency needs. Annuity withdrawals may be subject to surrender charges. However each contract year, you can withdraw up to 10% of your contract value free of any withdrawal charges. Amounts withdrawn from an annuity may further be subject to income tax as well. Flexible annuity withdrawals have the effect of diminishing cash surrender value, the death benefits and any of the living benefit.

If an annuity is withdrawn variably at or prior to the age of 591/2; a 10% federal penalty will apply over such withdrawal. Flexible annuity withdrawals also involve a certain degree of investment risk. Investment value of an annuity may fluctuate, including possible loss of the principal amount invested. Depending on the specific contract, Contingent Deferred Sales Charges may apply for surrenders or withdrawals, based on the number of years the contract has been in force.