Are there penalties for withdrawing from an annuity early?

Yes, most annuities impose surrender charges if you withdraw some or all of your money early after purchasing the annuity. These charges are in place because annuities are intended to provide guaranteed income for the long term, such as retirement.

Surrender fees are typically a percentage of the amount withdrawn and the duration of the surrender charge period can vary. For a typical annuity contract in India, this period can range from 6 to 8 years. Some annuities have an initial bonus but charge higher penalties if surrendered early.

Beyond surrender fees, you may face additional charges and taxes on earnings if you withdraw funds earlier than the stipulated period. However, most annuity contracts allow you to withdraw a portion without penalty.

When selecting an annuity provider and contract, it's important to consider the surrender period and potential charges. While designed to provide lifetime income, annuities do have liquidity tradeoffs to obtain their guarantees. Discuss surrender fees with your annuity advisor before investing to avoid surprises.