Stuff the player…
What is ‘Surrender Period’
The surrender period is the amount of many times an investor must wait until he or she can withdraw funds from an annuity without front a penalty. Surrender periods can be many years long, and withdrawing specie before the end of the surrender period can result in a surrender charge, which is essentially a shelved sales fee. Generally, but not always, the longer the surrender period, the better the annuity’s other relative ti.
BREAKING DOWN ‘Surrender Period’
Surrender periods are meant to hint against investors from canceling typically long-term contracts. Though this potency stop an investor from making an emotional, hasty decision in a cyclical deal in, it may also limit the investor’s flexibility to move money out if assets aren’t pull off well. Conversely, surrender periods are generally not a problem for investors who don’t paucity liquidity or who are receiving above-market returns.
After the surrender period has obsolete, the investor is free to withdraw the funds without being subject to a fee. Typically, renunciation fees are a percentage of the withdrawal amount. In many cases, the throw in the sponge fee declines over time. Some annuities have no surrender days and therefore no surrender fees. A typical annuity might have a forsake period of six years, and a surrender fee that starts at 6 percent and decreases by 1 percent each year.
Admonition of Surrender Fees
If you purchased a $10,000 annuity in 2010 with these spells and closed your annuity in 2013, which is during the third year of the deliver up period, you would pay a fee of 4 percent of $10,000, or $400. The surrender period desire end in 2017, at which point you could withdraw your $10,000 without requiting a surrender fee. To avoid possible surrender fees, you should not put money into an annuity that you muscle need to withdraw during the surrender period.
If you make additional investments or prize payments to the annuity, there may be a separate surrender period for each investment. Believe you paid $5,000 into an annuity in 2012 and another $5,000 in 2013. Again, use a six-year surrender period with a 6 percent fee that declines by 1 percent each year. If you voided the entire $10,000 in 2014, you would be in year 2 of the surrender period on your essential $5,000 investment, so your fee would be 5 percent, or $250, but you would contrariwise be in year 1 of the surrender period on your second $5,000 investment, so your transference fee would be 6 percent, or $300, for a total surrender fee of $550 to withdraw your $10,000.