How to Collect on an Annuity

Your annuity company could charge a penalty if you cancel your contract. Images

An annuity is a long-term investment contract that is commonly used by Americans to save for retirement. To buy an annuity, you need to make a deposit with an insurance or investment company. Your company will invest your savings and grow your balance over time. Whenever you are ready, you can request a payout from your annuity. At this point, you will have a few different options to collect on your annuity. The best payout option depends on how much money you need and on how long you want to receive payments.

Step 1

Contact your annuity company and ask to meet with a representative to discuss your options. Each annuity company offers a unique combination of payment options, so meeting with a representative ensures you know exactly what you can do.

Step 2

Review the different payout schedules available for your annuity. Companies typically offer a choice between monthly payments for the rest of your life and monthly payments for a fixed number of years.

Step 3

Select an annuity monthly payout schedule if you're ready to spend down your entire annuity balance. Once you start receiving payments, you can't stop.

Step 4

Ask if you can make a partial withdrawal from your annuity account. Many companies let you take out a percentage of your savings without charging a penalty. This is helpful if you need some money, but aren't ready to start receiving monthly payments.

Step 5

Cancel your contract to take out all your money in a lump-sum payment. You'll owe income tax on all your annuity gains that year. In addition, you might also get charged a penalty by your annuity company for cancelling your contract early.