District of Columbia
Surrender analysis in District of Columbia: Exit strategies, penalty avoidance, better alternatives
Free withdrawals • 1035 exchanges • Surrender charge analysis
2,147 annuity owners evaluated exit strategies and alternatives this year
Most annuities have 5-10 year surrender periods with declining penalties. Understand exact charges before exiting.
Switch to a better annuity tax-free without triggering surrender charges in many cases. Keep tax deferral.
Most annuities allow 10% annual free withdrawals. Access funds without penalty while keeping contract.
Understanding alternatives to full surrender
Cash out completely. You'll pay surrender charges (typically 5-10% in early years) plus income tax on gains. If under 59½, add 10% IRS penalty. Last resort - only if you need ALL money immediately and understand costs.
Transfer to a better annuity tax-free. No income tax, no IRS penalty. Many companies will cover surrender charges to earn your business. Best option if your issue is fees or features - not need for cash.
Take 10% free withdrawal annually without surrender charges. Meets partial liquidity needs while keeping contract. Pay tax only on withdrawn amount. Good if you need some money but not everything.
Surrender charges decline annually and eventually disappear (typically year 6-10). If you can wait, charges may drop to 2-3% or zero. Meanwhile, use free withdrawal provision for liquidity.
Example: How surrender charges decline over time
| Contract Year | Surrender Charge | You Keep (per $100K) |
|---|---|---|
| Year 1 | 9% | $91,000 |
| Year 2 | 8% | $92,000 |
| Year 3 | 7% | $93,000 |
| Year 5 | 5% | $95,000 |
| Year 7 | 3% | $97,000 |
| Year 9+ | 0% | $100,000 |
Understand your options before making an expensive mistake