• Withdrawing money from an annuitydollars image by peter Hires Images from Fotolia.com
  
  Annuity contracts are savings products designed and sold by life insurance companies. The types of annuities that offer cash withdrawals are called "deferred annuities." These annuities pay interest on savings that are deposited into the annuity. This interest payment can be fixed or variable, and the total savings amount can be guaranteed against loss or allowed to fluctuate with the underlying investments of the annuity. However, the IRS establishes certain rules for withdrawing money from your annuity.
  
  

Qualified Annuity Withdrawals

• Qualified annuities are annuities that are purchased inside of a qualified retirement plan, such as an IRA. These annuities are subject to the rules and regulations for IRA-type plans regarding withdrawals. Specifically, money generally cannot be withdrawn prior to age 59 1/2. Money withdrawn prior to this age will be subject to a penalty of 10 percent based on the amount of money withdrawn. Additionally, ordinary income taxes will be assessed on any amounts withdrawn. If money is not withdrawn after 70 1/2, according to an IRS schedule, then an additional 50-percent penalty will be assessed on the amount that should have been withdrawn.
  
  

Non-Qualified Annuity Withdrawals

• Non-qualified annuities are annuities that are not housed inside of a qualified retirement plan. These annuities will be assessed a penalty of 10 percent, similar to qualified annuity plans, for any withdrawals that are made prior to age 59 1/2.
  
  

Surrender Charges

• Insurance companies often have surrender charges that are assessed if you withdraw money prior to the contract's maturity. The surrender charge represents a penalty for early withdrawal and is deducted from the annuity's account balance. These surrender charges are generally on a decreasing, or sliding, scale.