Can you cancel a fixed-income annuity contract anytime? Why or why not?

  • 9
    Presumably depends a lot on what the contract says.
    – TripeHound
    Feb 11 at 20:01
  • 1
    Yes, you can cancel a fixed-income annuity contract anytime. All you have to do is die. Other than that, unless you purchase a rider that allows this (if it even exists) then no, there is no cancellation. Feb 12 at 14:37

3 Answers 3


Most traditional annuities are purchased; you give them money once and they promise to send you checks on a regular basis for the rest of your life and/or the lives of anyone else you want to cover. Think of it as a kind of life insurance product; you are paying them to guarantee that you won't outlive this money.

I have recently found that there are some exceptions where you can withdraw your principal again. Presumably without interest other than what they gave already paid you, and I presume you pay a premium for flexibility in the form of lower return. Read the contract carefully to make sure you know what you are agreeing to.

I'm sure there are intermediate mixed time-deposit/insurance products, though I haven't investigated the full range. Generally the longer the period before you expect the principal back, and the less of the principal you expect back, and the lower your expected lifespan, the higher your checks from the annuity will be. I'm getting a guaranteed 8% on mine, but that's a pure purchase insurance product.

When considering annuities, also remember to check out charitable remainder funds, which many nonprofits now offer. These offer a lower cash return than a for-profit annuity might, but have tax advantages which offset that -- and if you're going to make a large legacy gift anyway (and are sure you won't change your mind) this can be a good option, letting them lock in the donation for planning purposes while letting you continue to draw income. I've seen some fairly attractive rates on these recently.

  • 1
    Most annuities are purchased; you give them money once and they promise to send you checks on a regular basis for the rest of your life and/or the lives of anyone else you want to cover. No. There are fixed annuities for as little as two years. Variable annuities come in as short as 3 years. Step-up annuities tend to be 5-6 years. Fixed tend to allow either the interest or a 10% withdrawal per year (gains come out first, then principal) though with short term fixed annuities, it might not be until the 2nd year. Feb 12 at 14:34
  • Rephrased/expanded. I'm not sure I consider the shorter-term arrangements annuities, but by whatever term it's a valid point.
    – keshlam
    Feb 12 at 15:04
  • You can consider the shorter-term arrangements annuities to be whatever you want but the industry defines them as fixed annuities with the same features of longer term FA's (tax sheltered, annual withdrawal features, allowable tax free 1035 exchange at maturity, etc.) Feb 12 at 18:54
  • @BobBaerker What do you mean by "for as little as two years..."? Feb 12 at 20:25
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    An "X" year fixed annuity at 5% is just like an "X" year 5% CD except that the annuity is tax sheltered and may allow some amount of withdrawal each year, typically 10% or the annual interest. They are dissimilar in that a CD has FDIC insurance. It has nothing to do with Whole Life so don't go down that rabbit hole. Feb 13 at 0:04

There are different types of fixed annuities. Some are irrevocable.

I'm going to assume that you are referring to one that is for "X" years at Y% with the principal being returned at the end of the surrender period. These tend to allow a withdrawal of 10% a year or an annual withdrawal of interest. Sometimes, the withdrawal provision may not begin until the second year. You cannot just cancel it and get your money back without penalty.

If you close the annuity before the end of the surrender period, you may incur significant surrender charges and possibly, loss of the income.

The bottom line is that the terms of the contract will determine what, if anything, you can do. This varies from contract to contract and company to company.

  • I'm talking about fixed-income, not necessarily fixed-interest. So fixed-income annuity pays one monthly income until one pass away right? I'm saying if you can just cancel this kind of annuity contract and get your lump sum minus any income already paid anytime? Feb 13 at 4:40
  • 1
    That is an income annuity, aka immediate annuity or single-premium immediate annuity (SPIA). It is irrevocable Feb 13 at 16:38
  • So you're saying fixed-income annuity means income equity? So I cannot just cancel the annuity contract anytime after purchase? Feb 13 at 22:24
  • Most US states require a grace period, generally 10-30 days. An insurance company may provide a longer free look period. Beyond that, any cancellation is going to incur penalties, unless it's an irrevocable annuity. Feb 14 at 17:08
  • Ok, so if I can take the penalties and the contract said I can cancel, it's cancellable? Feb 14 at 22:43

Fixed-income annuity contracts typically come with specific terms and conditions regarding cancellation. Whether or not you can cancel such a contract anytime depends on the terms outlined in the contract itself and the regulations in your jurisdiction.

In general, fixed-income annuities are long-term contracts designed to provide a steady stream of income for a specified period or for the remainder of the annuitant's life. Canceling such a contract prematurely may result in penalties, surrender charges, or loss of accrued benefits.

It's essential to carefully review the terms of the annuity contract, including any surrender charges or penalties for early termination, before deciding to cancel. Additionally, consulting with a financial advisor or the insurance company that issued the annuity can provide specific guidance based on your individual situation and the terms of your contract.


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