How To Cash Out A Tax Deferred Annuity?

  1. 21750 POINTS
    Jim Winkler
    CEO/Owner, Winkler Financial Group, Houston, Texas
    That is a great question! You will want to contact the agent that sold the annuity, or the financial institution that sold it, and ask them to start the process for you. You want to remember that in most cases, the amount of principal that was used to start the annuity will be the amount un-taxed, all of the interest earned on the annuity over the years will be considered gain, and thus taxable. Taking the funds out of the annuity in a lump sum will cause that tax to be applied at once also, and may substantially reduce the amount paid to you. If the annuity is still within the surrender period, there may be penalties or fees applied also that will reduce your payout. I do not know your reason for cashing it out, but there may be a better way to get cash if you need it quickly than to surrender your annuity. If you would like to discuss them, please contact me, I'd be happy to help. Thanks for asking!
    Answered on June 26, 2014
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  2. 37376 POINTS
    David G. Pipes, CLU®, RICP®
    Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
    A tax deferred annuity can be surrendered at any time. The amount of money returned will equal the value of the annuity minus any surrender charges. Taxation will be applied depending on the nature of the annuity. If it is a qualified annuity the distribution will be treated as ordinary income and depending upon your age could be subject to a surcharge. If it is a non-qualified annuity it will be taxed to the extent that the value exceeds the premiums paid. This could also be subject to the surcharge.
    Answered on February 11, 2015
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