Tax consequences of liquidating an annuity

You should consult with your employer to determine if contributions could be suspended as a result of taking an early withdrawal.

The Early Withdrawal Calculator results represent analysis and estimates based on the information you have provided, but they do not reflect all relevant elements of your personal situation.

One option to get out of a bad variable annuity is simply to terminate the contract. But beware: cashing out of an annuity can have tax consequences and surrender charges, and you may miss out on potential benefits, depending on the annuity contract and your personal situation.

Most commission-based variable annuities come with a “surrender period,” during which you pay a penalty to withdraw money, and the surrender charge can be hefty, even up to 10% or more in some cases but declining over time.Annuitization may be a good option mathematically if you expect to outlive your projected lifespan.However, the term used by many annuity companies, “lifetime income,” is somewhat of a misnomer because unless you live for a long time, the value you receive in “income” may not exceed what you purchased the annuity for in the first place!The tools and information on this webpage permit you to estimate the impact of taking an early withdrawal from your retirement account, including potential lost asset growth, tax consequences and penalties based on information you specify.This calculator does not take into account any impacts resulting from the possibility of your plan provider suspending contributions for a period of time after a withdrawal is taken; nor does it consider whether you might have alternative sources of money available other than withdrawing money from your retirement plan.

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