What Is The Purpose Of Surrender Charges In A Deferred Annuity? 
That is a great question ! Whenever you deposit money into an account , be it at your bank , credit union , or annuity fund , that money does n't just sit there in a box labelled `` you '' . The financial institution immediately takes the money from the `` you '' box , and uses it to cover their expenses , pay out someone else , or invest it to make their profits . When you take that money out early , it costs them , as they were planning on it being there until the annuitization phase of your annuity was scheduled to begin . Now they have to scramble to get the money back into the `` you '' box . That often costs them money from the interest they were earning by using the money you 'd put in your `` box '' . To recapture some of their loss , and to act as an incentive to deter you from pulling out your `` box '' early , they assess the surrender charges . You will notice that they are highest at the beginning of your annuity , and decrease as time goes on . That is because the longer your money stays with them , the more likely it is that they 've earned what they needed to to repay your money with it 's promised interest . Does that help ? I hope so , feel free to contact me if it does n't , okay ? Thanks for asking ! 