Can I Withdraw Money from My Income Annuity?
Without question, the number one benefit to owning an income annuity is that you receive guaranteed income for the rest of your life! The tradeoff is that you give up control over the premium paid to the insurance company.
So while having a secure lifetime income is a great comfort to an annuity holder, the fact that immediate annuities and deferred income annuities are mostly illiquid can feel quite restrictive to someone shopping for these types of annuity.
If you're wondering, “Can I tap into my annuity if something unexpected happens and I need extra cash?” -- The good news is that some of the insurance companies have recently relaxed their restrictions and offer some limited liquidity in their immediate and deferred income annuity contracts.
Generally, these liquidity features are similar to being able to take a cash advance on a paycheck. They allow you to request a limited number of future payments in a lump sum to get you through the crisis.
However, you shouldn't rely on an immediate or deferred income annuity for extra cash, except in an emergency. It's not really designed for that kind of withdrawal.
If the opportunity to take cash out of an income annuity – for any reason – is a concern to you, you should discuss this up front with your advisor. He or she can show you the options available from different insurance companies and the implications of each.