Can I Withdraw Money from My Income Annuity?

Written by Hersh Stern Updated Wednesday, June 12, 2024

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.

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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.

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Comments (4)

  1. Connie B.
    2014-12-09 15:45:21

    I was divorced on nov14 this year. I was awarded 46,000 of the annuity that we can have access to now, however I am in a very rough financial spot.. no vehicle, home or job... can I use my decree with judges signature awarding me the annuity to loan enough to get on my feet and if so what would fees be for doing so?

  2. Hersh
    2014-12-09 15:47:57

    Hi Connie--

    First, before I answer your question I want to strongly urge you to meet with a financial planner to determine whether or not borrowing from your annuity is a suitable decision in your situation. You should discuss with her or him whether your current financial stress is just a temporary problem or whether it's likely to be a long-term problem. There are many other considerations you need to look at. For example, when will you be able to repay the loan (if you can get one)? Are there adverse tax consequences if you borrow against an annuity for which you didn't pay the premium (you got it as part of your divorce)? These are just a few of the questions that you should review with your planner or accountant.

    Regarding your question about getting cash now for your annuity, I believe your options will depend on the kind of annuity you have and what type of payment plan it guarantees.

    1. Deferred Annuity

    If you own an annuity that has a cash surrender value, meaning, the insurance company will pay out a lump sum on request, then you might be able to request that value today or borrow against it. I suggest you contact the insurance company and find out if there is a cash value. If there is then the next step would be to contact a branch manager at a local bank and ask them your questions. They should be able to tell you whether they'll accept your annuity as collateral.

    2. Immediate Annuity

    If your annuity does NOT have a cash value, in other words, it's the kind of annuity that is already paying out a monthly income, it's unlikely a bank will accept it as collateral. If you eventually defaulted on your loan the bank would have a tough time getting any cash from the annuity it held.

    However, there are factoring companies that may give you a lump sum today in exchange for your transferring the rights to any future income payments to them. Google the phrase "sell my annuity" and call some of the companies listed in your search results. Don't be surprised if you're only offered 40 to 50 cents on the dollar. These companies typically pay a deeply discounted amount for future income.

    Good luck and let me know how this is going for you.


  3. Angela R.
    2022-09-24 14:00:44

    My husband has a Retire Ease Annuity and I would like to know if he can take cash out?

    Thank you

  4. Kyle
    2022-09-26 10:56:22

    Hello Angela,

    We would have to recommend that you reach out to Mass Mutual directly to determine whether your husband's policy offers a liquidity (or cash out) feature.

    Best regards,