Surrender period

The period during which withdrawing more than a contract’s free-withdrawal amount can trigger a surrender charge.

A fixed or fixed indexed annuity credits interest under the terms of the contract, and in exchange the contract limits access to the principal for a defined period — often three to ten years. Withdrawals above the contract’s free-withdrawal amount can trigger a surrender charge, which typically starts highest and declines each contract year. Some contracts also apply a market value adjustment, which can increase or decrease the amount received depending on interest-rate movement. Free-withdrawal amounts, hardship or confinement waivers, and terminal-illness provisions vary by contract, contract year, state, and carrier, so the issued contract is the only reliable source. Crediting differs by product type: a fixed annuity credits a stated rate for a defined period, while a fixed indexed annuity credits index-linked interest determined by its crediting method, caps, spreads, and participation rates — which is not a known rate in advance.

Sources

• NAIC — Buyer’s Guide for Deferred Annuities
• FINRA — Understanding Annuities

Educational information only. This page is not individualized insurance, investment, tax, legal, or accounting advice, and it is not a recommendation to buy or replace any product.

Keep reading

• How a fixed annuity actually works
• Fixed annuities