Should You Pull Your Money Out Sooner?
Consider your options carefully before pulling money out of your annuity. There are two types of annuities — immediate and deferred — and both will suffer tax penalties if you decide to withdraw cash early. Immediate annuity payments begin almost immediately after receiving the annuity and continue over a predetermined term. A deferred annuity accrues the amount of the annuity and related interest over time before being released to the recipient in a payment structure. Deferred annuities are typically used to fund retirement. With both annuities, early withdrawal can mean paying surrender charges, tax payments due on interest earned and up to a 10% penalty if you withdraw before age 59.5.
On the other hand, the reality of life is that… stuff happens. Hopes, dreams and the best-laid plans get interrupted by situations that have to be dealt with or taken advantage of. That goes for expensive emergencies and new business opportunities.
When those times hit, you need to evaluate your budget and determine how much money you need for unexpected expenses. In some cases, facing penalties or tax payments for tapping into an annuity can be worth it to help your family through medical costs, car or home maintenance, college tuition and other needs.