Using Free Withdrawals In Annuity Contracts

The Free Withdrawal from your annuity is a critical element in your decision process, and any Annuity buyer must carefully consider how they would use free withdrawals, and when.

Every annuity contract contains a clause allowing the free withdrawal of a certain percentage of the initial premium each year without a surrender charge. Individual states have laws that dictate a minimum percentage.

Typically, the amount of free withdrawal is around 10% and some annuities allow for a 15% free withdrawal.  On the flip side, there are products that limit the withdrawal to 5%.

High Quality companies offer more than the state mandated minimum.  Like most of the factors we discuss, this fundamental integrity and respect for customers permeates their contracts and earns your trust and your business.

Conversely, many annuity agents and companies will use bonus rates and higher minimum guaranteed yields to entice you into lower minimum withdrawal allowances. Is this in YOUR best interest?

Remember the Ground Rules ! It should go without saying that the bigger free withdrawals are good for the customer and the smaller ones are good for the insurance company.  Which would you choose?

Action Items:

If liquidity and control of your capital is important, be sure that your free withdrawals are as large as possible
Quality companies are not afraid of you withdrawing your money, and consequently don’t sink to the lowest levels allowed by law for your withdrawal allowance.
Remember, it’s YOUR money.

Written By

Bryan Anderson