Meanwhile, the other part of your premium can be invested in variable portfolios that have the potential to provide higher returns. Most variable annuities provide for withdrawal of a specified amount free of charge. Withdrawals in excess of the amount specified are possible but, in the early years of the contract, may trigger surrender charges. An MVA ensures that you receive the market value of assets withdrawn before their maturity date and may increase or decrease the value of your account. Finally, be aware that some annuities allow you to make systematic withdrawals from your account on a regularly scheduled basis, which can help in providing you with a steady income.
Systematic withdrawals are subject to the same tax rules as other withdrawals.
Most companies offer several annuity options, based primarily on how long you want the income to last. Meanwhile, the undistributed portion of your investment continues to compound, tax-deferred. Once you have annuitized, each payment is structured as a partial return of principal and part interest. Only the interest portion of the payment is taxable. You should consult your financial advisor before deciding to annuitize.