What does it take to get your money out of your annuities? That is a great question. It is probably no surprise that your annuity has surrender charges. However, some annuities require even a little more than waiting that surrender period out to getting your money. What I am talking about are what are typically referred to as two-tier annuities. Let me explain.

So what is a two-tier annuity? Essentially, It is an annuity that makes you go through two phases to get your money. The first phase is a deferral period. In this period, you are basically in 'waiting' while your annuity accrues interest. This is essentially 'the first tier.' Often times, you may have limited access to your money in this period but it is very limited (5-10% per year). The second phase is called a payout phase. This is when the insurance company pays you your money back. It is typically over a specified time period (usually 5 years or longer).

So let me explain this again. In a two-tier annuity, you invest your money. The 'investment' or 'waiting' period may be for 5 years (and sometimes as long as 10 or 15 years). Here is the kicker. No matter how long you keep your money in, you can never get it back in a lump sum. You must go through what is called a payout phase which again lasts for 5 years or longer. And what's worse is that often during these payout phases, the return is sometimes less than optimal. That means, no matter how well you did in your 'deferral' phase, your returns might become severely mitigated after you go through the payout phase.

AND FOR THE BIGGEST PROBLEM OF ALL...

The biggest problem isn't being in a two-tier annuity. The biggest problem is being in a two-tier annuity and NOT KNOWING you are in a two-tier annuity. Often, annuity consumers get shocked to find out that their annuity has a NEVER ENDING surrender period and that the only way to get the money out is by waiting out the deferral phase and taking their money over time. There are some annuities out there that require a 20 year time frame.

Again, the biggest problem is not knowing you are in a two tier annuity. Many clients have NO CLUE that they are in one. As I always say, ignorance IS NOT BLISS. You must know what you are getting in to prior to getting into it. Getting out of these annuities IS EXTREMELY expensive. Know thy annuity and know it well because you are going to have to live with it. Hope this helps.