In addition to sales commissions, most insurers selling annuities charge administrative fees to cover the costs of administering these contracts. For example, annuity owners typically pay a small percentage for the death benefit, plus administration fees.

Withdrawal Privilege Options

Many deferred annuities offer limited withdrawal privileges after the first year during the accumulation phase. The withdrawal privilege allows annuity owners to withdraw a small percentage (typically 10 percent) of the annuity fund each year without penalty.

There also may be IRS penalties on a portion of the money if one is under age 59 1/2, though a surrender charge would only apply if a larger percentage than the contract allows is withdrawn.

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