Glossary Term

Surrender Period

The surrender period is the length of time during which withdrawals from an annuity beyond the free withdrawal allowance will trigger a penalty called a surrender charge. For most MYGAs and fixed annuities, the surrender period matches the rate guarantee term.

How Surrender Periods Work

If you buy a 5-year MYGA, the surrender period is typically 5 years. During that time, you can usually withdraw 5-10% of your account value per year penalty-free. Withdrawals above that threshold are subject to a declining surrender charge, often starting at 8-9% in year one and decreasing to 0% by the end of the term.

Example surrender schedule for a 5-year contract:

Year 1 2 3 4 5 6+
Charge 8% 7% 6% 5% 4% 0%

Surrender Period vs. Guarantee Period

These are often the same length but not always. Some contracts have a surrender period that extends one year beyond the rate guarantee. Always verify both timelines before purchasing. Compare current fixed annuity rates with surrender terms side by side.

Key takeaway: The surrender period is the window during which early full withdrawals trigger a penalty. Most MYGAs allow 5-10% penalty-free access each year during this period.
Disclaimer: This glossary entry is for informational and educational purposes only. It does not constitute financial, tax, or legal advice. Annuity products vary by state and carrier. Always consult a licensed financial professional before making financial decisions.
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