If you already own an annuity—or you’re thinking about buying one—you’ve probably heard the warnings: “It’s locked up,” “You can’t touch your money,” “You’ll get crushed if you exit early.”
Some of that is outdated. Some of it is flat-out wrong.
In this article, I’ll walk you through how getting out of an annuity really works, when you can exit without getting burned, and when it absolutely doesn’t make sense to cancel.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using our annuity calculator
The #1 Thing People Worry About With Annuities: Liquidity
Let’s address this head-on.
Annuities are not designed for short-term liquidity. You’re buying a long-term contract—usually for income, protection, or steady growth.
That said, you’re not trapped.
Every modern annuity has built-in exit options. You just need to understand when they apply and what they cost.
👉 Want to see current annuity options and payouts? You can explore them yourself by using the free annuity calculators.
The Free-Look Period: Your Risk-Free Exit Window
Almost every annuity comes with a free-look period, usually:
- 30 days (most common)
- Sometimes 10–15 days, depending on the state
Here’s how it works:
- You receive the contract
- You review everything
- If you don’t like it, you cancel
- You get 100% of your money back
No fees. No penalties.
I’ve had clients do this—and their funds were returned within about two weeks.
💡 Pro Tip: Never feel rushed. That free-look period exists to protect you.
What Happens After the Free-Look Period?
Once the free-look window closes, the annuity enters a surrender charge period.
This is where the “getting burned” fear usually comes from.
Surrender charges:
- Start higher in early years
- Decline each year
- Eventually go to zero
They exist because insurance companies invest your money long-term (bonds, fixed income, etc.). If you exit early, they incur losses—so the cost is passed along.
Real Example: Income Annuity Exit Scenario
Let’s say:
- Married couple, both age 62
- $600,000 invested
- Planning to turn on income in 5 years
Projected guaranteed income: ~$62,000 per year for life
Sounds great—but what if they cancel right before income starts?
- Account value might be ~$628,000
- Cash surrender value: ~$617,000
Why the difference?
Surrender charges.
That’s the cost of exiting early.
But here’s the key point…
👉 If you never cancel, surrender charges never matter.
“But the Fees Look Huge…” (Here’s the Trade-Off)
Income annuities often have rider fees. Over time, those fees can add up—sometimes into the six figures.
But compare the outcomes:
- With income rider:
- Higher lifetime income
- Total income could exceed $1.8 million
Without the rider:
- Lower income (often 40–50% less)
- Lifetime income closer to $1 million
In many cases, people are trading ~$100,000 in fees for $600,000+ in additional lifetime income.
That’s not a rip-off—it’s a design choice.
👉 Want help comparing income vs growth annuities? Schedule a call here.
MYGAs (Multi-Year Guaranteed Annuities): Easier to Exit?
MYGAs are simpler.
Example:
- 7-year MYGA
- Paying ~5.1%
- Compounding growth
If surrendered early:
- You may pay a penalty
- But in many cases, you’re still above your original investment after a couple of years
So yes—you can exit—but there’s still a cost.
💡 Pro Tip: MYGAs are better for growth; income annuities are better for lifetime cash flow. Mixing them often works best.
When Does It Actually Make Sense to Cancel an Annuity?
Sometimes, replacing an annuity does make sense.
I’ve helped people who were:
- In outdated products
- Earning low income
- Facing surrender charges of 8–10%
In those cases, we:
- Used a bonus annuity
- Covered the surrender cost
- Increased lifetime income substantially
This strategy works only when income—not growth—is the primary goal.
👉 Thinking about replacing an annuity? Let’s review it first before you make a move.
How to Avoid Getting Burned (This Is the Real Secret)
Here’s how people don’t get burned:
- Do your research first
- Compare multiple annuities—not just one
- Keep liquid savings outside the annuity
- Buy with the intention of holding long-term
That’s exactly why I built my calculators—to let you see everything yourself instead of taking anyone’s word for it (including mine).
Conclusion
Annuities aren’t perfect. But they’re not scams either.
You can get out early.
You just need to know when, how, and what it costs.
My job is to make sure you go in with eyes wide open, with clarity—not fear.
Need help with finding the best annuity for your retirement?
Click here to schedule a call with me.
On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have