Last reviewed: 2 October 2026
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Annuity surrender charges, fees and withdrawals: what FINRA says
The short answer: FINRA says annuities carry fees such as surrender charges, mortality and expense risk charges and administrative fees, and that variable annuities can have surrender periods of eight years or more, during which you can be charged penalties if you liquidate.[1] This page reports what that one regulator page says; it is not a review of any annuity.
The costs FINRA names
FINRA says annuities come with a variety of fees and expenses, naming surrender charges, mortality and expense risk charges and administrative fees, and says they can have high commissions.[1] It adds that you may also be charged for special features and riders, listing stepped-up death benefits, guaranteed minimum income or withdrawal benefits, long-term health insurance and principal protection.[1]
Surrender charges and surrender periods
FINRA says variable annuities can feature surrender periods of eight years or more, during which you can be assessed penalties if you liquidate the annuity, and says to give careful consideration to how much of your funds are concentrated in the investment and to your need for liquidity during that period.[1] For registered index-linked annuities (RILAs), it says you can experience losses if you withdraw money early.[1] The page we read gives no schedule of surrender-charge percentages or lengths for other annuity types; those are set in each contract.
Taking money out
| Option FINRA lists | What it says |
|---|---|
| Annuitize | Convert a deferred annuity into guaranteed income for a certain period or for life. The decision to annuitize is generally irrevocable, and you give up control of your investment to the insurer in exchange for the income guarantee.[1] |
| Systematic withdrawals or a lump sum | You maintain control of your investment but forfeit the insurer's guarantee that you will not outlive your money.[1] |
| Lifetime-withdrawal rider | Some insurers offer riders that guarantee your ability to make lifetime withdrawals without annuitization; riders are sold at an additional cost.[1] |
Exchanges, replacements and buyout offers
FINRA says exchanging one contract for a new one may involve additional costs and fees, including surrender charges, and usually means the clock restarts for early-withdrawal penalties.[1] It describes a "1035 exchange" as a provision of the U.S. tax code permitting a direct transfer from a life insurance, endowment or annuity policy to another without tax consequences.[1] For variable annuity buyout offers, it says accepting one may cost you valuable benefits and could bring a new surrender charge period, less favorable benefits and higher fees and expenses.[1] Our guides on 1035 exchanges and churning and twisting cover the related rules.
Taxes on withdrawals
FINRA says you do not pay taxes on growth in an annuity until you start making withdrawals, that gains are taxed at ordinary income rates when you take money out, and that if you withdraw before age 59½ you may face a 10 percent tax penalty. It suggests consulting a tax professional before purchasing or withdrawing any funds.[1]
Who regulates what
FINRA says all annuities are regulated by state insurance commissioners, and variable annuities and RILAs, which are securities, are also regulated by the SEC and FINRA.[1] It says annuities are not guaranteed by the FDIC, SIPC or any other federal agency, though there may be state guarantees if an insurer fails.[1]
Questions to ask (our own worksheet, not FINRA’s)
For variable annuities FINRA says to read the prospectus, ask the seller to explain all features, riders, costs and restrictions, and know how the broker is being compensated, including whether a commission is received and how much.[1] It says you can check whether a broker is registered or has a complaint history on its BrokerCheck tool.[1] A worksheet of questions for any contract, built from those points rather than any formula:
- What is the surrender period, and what charge applies in each year of it?
- What limit, if any, applies to withdrawals during that period?
- Which fees and rider charges apply each year, and how are they taken?
- What happens to the surrender period if I exchange or replace this contract?
- How is the person selling it paid?
The contract and prospectus, not this page, hold the answers for a given annuity. Your state insurance regulator can say what its rules require to be disclosed; see our regulator guide and free-look guide.
How to verify this yourself
Read FINRA's annuities page in the references, then the annuity's own contract and, for a variable annuity or RILA, its prospectus. For a person selling a variable annuity or RILA, FINRA names BrokerCheck; for any insurance producer, use your state regulator's license lookup.
What this page does not cover
It rests on one regulator page and does not draw on the SEC's investor-education pages. It gives no surrender-charge percentages, no calculator and no comparison of any product or insurer, and it does not say whether any annuity is suitable for anyone. It is general information, not tax, legal or financial advice; for your own situation, ask a licensed professional you have checked and your state insurance regulator.
Related checks
Our standard says how we check an agent's license and disciplinary history, and Check an agent reports our findings at category level. Neither is a review of any insurer, plan or health-care provider, and neither replaces asking the regulator or program named above.
When we will update this page
We re-read the sources when they change. If something here is out of date, tell us; corrections are dated on the page.
References
- [1] FINRA, "Annuities" (Investor Insights), read 2 October 2026 — www.finra.org/investors/investing/investment-products/annuities
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