How Long It Takes to Cash Out an Annuity

The timeline depends on the annuity type and whether you own it outright

Cashing out an annuity is not a single process with one timeline. How long it takes depends on whether you have an when ready annuity or a deferred annuity, whether you own it or inherited it, and what surrender or withdrawal rules the contract sets. An when ready annuity that is already paying you cannot be cashed out at all — you receive payments on the schedule you chose. A deferred annuity you own can often be withdrawn within days to weeks, but you may owe surrender charges and taxes. An inherited annuity has different rules and timelines depending on your relationship to the original owner and the contract terms.

The actual processing time — from the moment you request the cash to when money reaches your account — typically ranges from 5 to 10 business days for most contracts. But the decision to cash out and the financial consequences happen before that processing begins.

Key Takeaways

• when ready annuities that are already paying you cannot be cashed out; you receive the scheduled payments for life or a set period depending on your contract.
• Deferred annuities you own can usually be withdrawn within days to weeks, but surrender charges may explore if you withdraw before the contract term ends.
• Inherited annuities have different withdrawal timelines and tax rules depending on whether you are a spouse, non-spouse beneficiary, or the estate.
• Processing time from request to deposit is usually 5 to 10 business days, but some carriers take longer during high-volume periods.
• Taxes on the withdrawal are typically withheld at the time of distribution, so the amount you receive may be less than the full value you requested.

when ready annuities cannot be cashed out once payments begin

If you own an when ready annuity that is already paying you monthly, quarterly, or annually, you cannot cash it out in the traditional sense. The contract obligates the insurance company to send you payments on the schedule you selected when you purchased the annuity. Those payments continue for the period you chose — your lifetime, a set number of years, or a combination of both.

Some when ready annuities include a cash refund option or a period certain may provide, which means if you die before receiving the full value of your initial investment, your beneficiary receives the remaining balance. But that is a beneficiary payment, not a cash-out by you. If you want access to a large sum of money before your scheduled payments would provide it, an when ready annuity does not offer that option.

Deferred annuities can be withdrawn, but timing and costs vary by contract

A deferred annuity — one you have not yet started taking payments from — can be withdrawn. The time it takes depends on the contract and the carrier. Most insurance companies process withdrawal requests within 5 to 10 business days after they receive your completed request form. Some carriers are faster; others may take up to 15 business days, especially during periods when they receive many requests at once.

Before you request the withdrawal, check your contract for the surrender period. This is a set number of years (often 5, 7, or 10 years) during which the insurance company charges a surrender fee if you withdraw more than a small amount — typically 1 to 10 percent of the withdrawal amount, depending on how many years into the period you are. If you are past the surrender period, you can withdraw without this penalty. If you are still in it, the fee reduces the amount you receive.

Taxes also affect the net amount you receive. Withdrawals from deferred annuities are taxed as ordinary income on the earnings portion (not on the amount you originally invested). The carrier typically withholds federal income tax — usually 10 percent — at the time of distribution. If you are under 59½, you may also owe a 10 percent early withdrawal penalty on the earnings, though some exceptions exist.

Inherited annuities have different withdrawal rules and timelines

If you inherited an annuity, the timeline and rules for cashing it out depend on your relationship to the original owner and the contract terms. The find Act (passed in 2019) changed how most non-spouse beneficiaries must handle inherited annuities.

If you are the surviving spouse, you have the most flexibility. You can take the annuity as your own, request a lump-sum payout, or take payments over time. A lump-sum payout typically processes within 5 to 10 business days, the same as a regular withdrawal. If you are a non-spouse beneficiary — a child, sibling, or other heir — you generally must withdraw the entire annuity value within 10 years of the original owner's death, though the contract may allow you to take payments during that period rather than a single lump sum. The processing time for each withdrawal or payment is still 5 to 10 business days, but the overall timeline is stretched across up to a decade.

If the annuity was left to the deceased's estate rather than to you by name, the estate's executor must request the payout. This adds time because the executor must follow probate procedures, which vary by state and can take several months to over a year before the annuity withdrawal can even be requested.

Surrender charges reduce your payout if you cash out early

A surrender charge is a penalty the insurance company deducts from your withdrawal if you cash out a deferred annuity before the surrender period ends. The charge is a percentage of the amount you withdraw, and the percentage usually decreases each year you hold the contract. For example, a contract might charge 7 percent in year one, 6 percent in year two, and so on until year 8, when the surrender period ends and no charge applies.

The surrender period is set when you buy the annuity and is written in your contract. It is not the same as the time it takes to process the withdrawal. Even if processing takes only 5 days, the surrender charge still applies if you are within the surrender period. Some contracts allow you to withdraw a small amount each year — often 10 percent of your account value — without a surrender charge, even during the surrender period. Check your contract to see if this option exists.

Surrender charges are separate from taxes. You owe both: the surrender charge reduces your payout, and then taxes are withheld on the remaining amount.

Federal tax withholding happens at the time of distribution

When you request a cash-out withdrawal from an annuity, the insurance company withholds federal income tax before sending you the money. The standard withholding rate is 10 percent of the taxable portion of your withdrawal. The taxable portion is the earnings — the growth your money earned inside the annuity — not the original amount you invested (called your basis).

If your withdrawal is $50,000 and $20,000 of that is earnings, the company withholds 10 percent of $20,000, or $2,000. You receive $48,000. This withholding is not the final tax bill; it is a prepayment. When you file your tax return, you may owe more tax or receive a refund depending on your total income and tax bracket for the year.

If you are under 59½, you may also owe a 10 percent early withdrawal penalty on the earnings portion, in addition to income tax. This penalty is separate from withholding and is calculated when you file your return. Some exceptions to the penalty exist — for example, if you are withdrawing from an inherited annuity or if you take substantially equal periodic payments — but the standard rule applies to most early withdrawals.

Processing delays can occur during high-volume periods

The 5 to 10 business day timeline assumes normal conditions. During periods when insurance companies receive many withdrawal requests — such as market downturns or year-end — processing can take longer. Some carriers have reported delays of up to 15 or even 20 business days during these periods.

The delay happens after you submit your request. Before you submit, you need time to gather documents: your annuity contract, proof of identity, and a completed withdrawal form from the carrier. Getting these together can take a few days to a week depending on how quickly you locate your contract and how fast the carrier responds to your request for the form.

Once the carrier receives your completed request, they verify the information, calculate any surrender charges and taxes, and process the payment. This is where the 5 to 10 business day timeline applies. If the carrier needs additional information from you — for example, a notarized signature or proof of address — the clock stops until you provide it, which can add days or weeks.

Frequently Asked Questions

Can I get my money faster if I pay a fee to expedite the withdrawal?

Most insurance carriers do not offer expedited processing for an additional fee. The 5 to 10 business day timeline is their standard. Some carriers may process faster if you request it and explain the reason, but this is not may provide and does not typically involve an extra charge. Contact your carrier directly to ask if expedited processing is possible in your situation.

What happens if the insurance company goes out of business while I am waiting for my withdrawal?

Insurance companies are regulated by state insurance departments, and each state has a guaranty fund that protects annuity holders if a carrier becomes insolvent. The protection limits vary by state but typically cover up to $250,000 per person per carrier. If a company fails, the guaranty fund takes over and processes withdrawals, which may take longer than the standard timeline.

Do I have to take the entire annuity value out at once, or can I withdraw part of it?

Most deferred annuities allow partial withdrawals, and each withdrawal is processed separately with its own timeline. Some contracts limit how often you can withdraw or charge a fee for each withdrawal. Check your contract or call your carrier to see what partial withdrawal options are available and whether they affect your surrender period.

If I cash out my annuity, can I put the money into another retirement account to avoid taxes?

No. Annuity withdrawals are taxable distributions, and you cannot roll them into an IRA or other retirement account to defer the tax. The tax is due in the year you withdraw the money. However, if you inherited an annuity, you may have options to take payments over time rather than a lump sum, which can spread the tax burden across multiple years.

How do I know if I am still in the surrender period?

Your annuity contract states the surrender period length and the date you purchased the annuity. Count forward from the purchase date to see if you are still within that period. Your carrier can also tell you the surrender period end date if you call or log into your account online. Some carriers provide this information on your annual statement.