What is the surrender charge for early withdrawal from a variable annuity?

The surrender charge for early withdrawal from a variable annuity can vary significantly based on several factors, including the specific product, the length of time the annuity has been held, and the terms outlined in the contract. Typically, variable annuities impose surrender charges to discourage policyholders from withdrawing their funds too early, as these charges help recover costs incurred during the initial setup and sales of the annuity. Most variable annuities have a surrender charge schedule that decreases over time. For example, a typical schedule might feature high charges during the first few years, which gradually lessen until they reach zero after a set period, often ranging from five to ten years. The exact percentage of the charge is determined by the issuing company and detailed in the annuity contract, so it is essential for policyholders to review their contract for precise information. It is important to note that in addition to surrender charges, clients may also face income tax implications when withdrawing from a variable annuity, particularly if the funds are taken before the age of sixty-two or if they exceed the account basis. Given the complexity of these factors, it is advisable for individuals to consult their annuity agreement for specific details regarding surrender charges and consider seeking professional financial guidance if they are contemplating an early withdrawal. For further information, individuals may look on the current web page for The Variable Annuity Life Insurance Company's resources regarding these charges.