The 10% Free Withdrawal

Every quality deferred annuity in 2026 offers a 10% annual free withdrawal. Here is how it works. During the surrender period, you can take out up to 10% of your account balance each year without paying a surrender charge to the insurance company. If you have $200,000 in a MYGA or FIA, you can take out up to $20,000 per year during the surrender period, no penalty. Important details:

The 10% is calculated on the account balance, not the original deposit. As the balance grows, so does the free withdrawal amount. Some contracts do not allow the 10% in year one. The clock starts in year two. Some contracts allow unused withdrawal room to accumulate. If you take nothing in year one, you might be able to take 20% in year two. If you are under age 59 and a half, the IRS still charges a 10% early withdrawal penalty on top of ordinary income tax on the amount withdrawn, even if the annuity doesn't penalize you. SPIAs do not offer the 10% free withdrawal. SPIAs are already structured as an income stream. Once you buy one, the money is gone as a lump sum. You get the paycheck, not access to the balance.

The rule: never buy a deferred annuity that does not offer at least a 10% annual free withdrawal. Why? Because life happens. Roofs need replacing. Cars break down. Grandchildren need help. You need access to some portion of your money without paying a penalty.

If an agent shows you a contract with less than 10% annual free withdrawal, walk away. There are hundreds of contracts that offer it.