Liquidity Published: 2026-10-03

How Much Can You Withdraw From an Annuity Without Penalty?

Written by Hans Goldstein, independent licensed insurance producer · CA license 4273294 · NPN 20602398
Published October 3, 2026

Short answer: most fixed annuities and MYGAs let you withdraw a set amount each contract year with no surrender charge. The most common allowance is 10% of the account value; some MYGAs allow only the interest credited, some allow nothing in year one. Many contracts also waive charges for required minimum distributions, nursing home confinement or terminal illness. The IRS 10% penalty is separate and still applies to gains taken before 59½.

The common free withdrawal designs

Design	What you can take each year	Watch for
10% of account value	10% of the value, often measured on the contract anniversary	Whether it starts in year 1 or year 2; whether unused amounts carry over (usually not)
Interest only	The interest credited in the prior year	Lower than 10% when rates are low
Cumulative interest	All interest credited so far	Principal stays locked
None, or 5%	Little or nothing until the term ends	Often paired with a slightly higher rate

Your contract’s exact terms are in the “withdrawals” or “surrender charge” section and the disclosure you sign. The NAIC buyer’s guide explains the terms in general (NAIC Buyer’s Guide).

Free withdrawal calculator

Account value ($)

Credited rate (%)

Free withdrawal (% of value)

Years until the term ends

Withdrawal you want this year ($)

Surrender charge this year (%)

Assumes the free amount is measured on the current value at the start of each year and that you take the full free amount every year. Ignores any market value adjustment and taxes. Default rate = one A-rated insurer’s 5-year rate card effective September 25, 2026. Your contract’s rules control.

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Send your email and I'll send what it really guarantees, what the surrender schedule costs you, and the two or three carriers paying more for the same guarantee. If it's already a good fit, I'll tell you that.

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Waivers that open the contract early

RMDs: many IRA annuities let required minimum distributions out free even when they exceed the 10% (RMD annuity calculator).
Nursing home or long-term care confinement: often after a waiting period, such as 90 days of confinement.
Terminal illness and, on some contracts, unemployment or disability.
Death: the death benefit is usually paid without surrender charges.

These vary widely, so read them before you buy, not when you need them. An example contract with a 5% design is in my Nassau Simple Annuity review.

Free of surrender charges is not free of tax

A free withdrawal from a nonqualified annuity is taxed gain-first as ordinary income, and if you are under 59½ the IRS adds 10% on the taxable part. Run the full picture in the early withdrawal penalty calculator.

Need more than the free amount?

Options before paying a surrender charge: split the withdrawal across two contract years, use a different account for the gap, or check whether a loan or a partial 1035 exchange fits (should I take out a MYGA loan). Charges by year are in annuity surrender charges explained.

Want a second opinion on your numbers?

Straight answer, no pressure.

Send your details and I’ll reply with current guaranteed rates from highly rated insurers for your amount and term, and a plain-English read on your situation. If what you have is already the right fit, I’ll say so.

Rather talk it through? Or book 15 minutes on Hans’s calendar, or call 213-414-2808.

Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer appointed with multiple carriers

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Frequently Asked Questions

How much can I withdraw from my annuity without a surrender charge?

Most fixed annuities and MYGAs allow 10% of the account value each contract year without a surrender charge. Some allow only the interest credited and some allow nothing in the first year. Your contract's withdrawal section has the exact rule.

Does the free withdrawal carry over if I do not use it?

Usually not. On most contracts an unused free withdrawal amount does not accumulate into the next year, though some cumulative-interest designs let all credited interest come out.

Are RMDs penalty-free from an annuity?

On many IRA annuities, yes: required minimum distributions are waived from surrender charges even if they exceed the free withdrawal percentage. Confirm in your contract.

Is a free withdrawal tax-free?

No. Free means no surrender charge. Gains withdrawn from a nonqualified annuity are taxed as ordinary income, and before age 59 and a half a 10% IRS penalty generally applies to the taxable part.

Sources

Goldstein & Co. LLC dba Goldstein Insurance Services, CA lic. #4273294 · Hans Goldstein, NPN 20602398 · 213-414-2808 · hans@hansgoldstein.com

This page is general education. It is not tax, legal or investment advice and is not an offer or recommendation for any specific product. Calculator results are estimates from the stated assumptions, not quotes. Guarantees in a fixed annuity are contractual and are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are not FDIC insured. Annuities have surrender charges and other limitations; read the contract and disclosure before you buy. Consult a tax professional or attorney about your situation.