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.