Should I Surrender an Annuity?

Malcolm Tatum
Malcolm Tatum
An annuity is a type of contract between an individual and an insurance company.
An annuity is a type of contract between an individual and an insurance company.

The decision to surrender an annuity is one that should be considered very carefully before any action is taken. There are situations in which surrendering an annuity is the wisest course of action. In other situations, choosing to surrender a retirement annuity or some type of variable annuity may provide some type of short-term satisfaction, but ultimately is not in the best financial interests of the individual.

One of the most common reasons why people surrender an annuity is that the return from the investment has lessened to the point that cashing in and using the money to invest in some other plan seems like the best move to make. Often, some type of variable annuity is involved, and the underlying securities that drive the annuity have decreased significantly in value. Before actually choosing to cash in that annuity, take the time to investigate which factors led to the decrease, and how long those factors are likely to continue exerting some influence on the value of those underlying securities. By accurately projecting the future movement of those securities, you may find that the worst is over, and that your variable annuity will be increasing within a short period of time. If that is the case, holding on to the annuity is the best financial option.

Another common reason why some people choose to surrender an annuity has to do with financial hardship. Financial reverses caused by job losses or health issues that require costly medical treatments may lead to money woes that require the liquidation of at least some assets. Before choosing to cash in an annuity to deal with these money problems, look closely at other assets. If they are not providing the return current provided by the annuity, consider selling some of them first. Only surrender an annuity when there is no other reasonable option.

Keep in mind that when you surrender an annuity, there is a good chance that fees that are known as surrender charges will be imposed. These charges will reduce the amount you receive from the annuity. Before actually choosing to go this route, identify the amount of those charges. In some cases, a better option may be to arrange what is known as a partial exchange. This strategy allows you to use exchange a percentage of your annuity for some other type of investment contract. Doing so allows you to keep the annuity intact while also allowing you to earn additional return from the new investment.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including , and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including , and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

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    • An annuity is a type of contract between an individual and an insurance company.
      An annuity is a type of contract between an individual and an insurance company.