How to Withdraw from a Retirement Annuity

A retirement annuity is a supplemental savings program that allows money in the annuity to grow tax-deferred. Retirement annuities are either qualified, such as employer-sponsored plans, or non-qualified, meaning they are independently acquired from an insurance company. Taking distributions from your retirement annuity is a simple process that can be done at any age, but there may be tax penalties and other fees to consider. Understanding when and how much you can withdraw helps eliminate unwanted fees and penalties.

Establish if all assets in the annuity are taxable or only the earnings. Qualified plans reduce annual income by making the contribution: IRAs, 403b, employer salary reduction plans. Non-qualified plans allow contributions but receive no income deduction. Qualified plan distributions are 100 percent taxable, but only earnings are taxable in non-qualified plans.

Calculate any surrender charges you will be assessed for the distribution. A surrender charge is a fee for withdrawing funds out of the annuity prior to the contract term being completed. Surrender charges may start as high as 15 percent in year one and decline with each anniversary until it reaches zero.

Contact the annuity administrator by phone or in person. Request paperwork for a distribution. Confirm any surrender charges and required tax withholding for qualified plans.

Fill out the paperwork and submit it to the annuity administrator. You may take a full or partial distribution or decide to take regular payments. Choose the option that suits your needs.

File your taxes with Form 1040 and note the distribution in Line 16 based on the amount listed in the 1099-R sent to you by the annuity administrator.


  • Distributions taken prior to age 59 1/2 are assessed a 10 percent excise tax penalty. This penalty applies to the entire withdrawal on a qualified annuity but only to the earnings in a non-qualified annuity.