Sometimes the horrendous charges associated with some annuities are a major downside of owning the investment. Who wants to pay 15% in penalties just for access to your own money?
Well it isn't that bad. I asked that question like that because a lot of the times that is how new annuity investors see the charges. Since annuities are for the long term they do not belong in the short term moving money around segment of your investment portfolio. Annuities are for long term income and long term growth.
I always emphasize to my clients that annuities are long term investments that they probably won't ever move or sell. Because they do have surrender charges they are the last investments you want to use when you have an emergency. Always use short term investments and investments with no surrender charges or commissions first.
With careful planning you can avoid the surrender charges altogether. You can have lifelong income without worry of steep fees and penalties. Using your free withdrawal each year is only the beginning. How do you make sure you don't have to go over your free withdrawal?
Surrender charges can be horrendous! Careful planning can help to make sure you never have to pay those charges. But if you do need to get into your principal that is not free of surrender charges then at least you have a contract telling you exactly how much it will cost you which is something you do not have with any other type of investment.
To learn more about how to avoid surrender charges read - Avoiding Surrender Charges With Careful Planning.
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