Annuities can be an important part of retirement planning, providing guaranteed income and tax benefits. However, circumstances can change, and you may need access to the funds you’ve invested in your annuity. There are several options for withdrawing from an annuity, each with its own costs and considerations.

Here’s what you should know.

Purchasing an annuity typically requires a significant investment, often starting at $100,000 or more. While these products are intended to provide a steady income during retirement, committing such a large sum can lead some owners to seek a way out of their restrictive contracts.

There are four methods to access your funds from an annuity, but none allow you to withdraw your entire investment without incurring costs. To access more than 10 percent of your annuity’s value, you’ll likely face fees and taxes, making the process both complicated and costly.

Most annuity companies allow you to cash out or surrender your contract for its current value or withdraw a portion of the accumulated funds before income payments begin. However, keep in mind that surrender charges will be deducted from the amount you receive.

Cashing out your annuity is the most straightforward option but can also be the most costly. Most surrender charge periods last six to eight years from the purchase date, and these charges can be significant, often starting around 7 percent or higher in the initial years and gradually decreasing over time.

If you’re under age 59½, you’ll also incur a 10 percent penalty from the IRS for early withdrawals, similar to penalties for 401(k)s, IRAs, and other tax-advantaged accounts.

Some annuity contracts offer crisis waivers, which can suspend surrender charges in specific situations, such as terminal illness or nursing home confinement. If you think you may need access to your annuity funds before the surrender period ends, inquire about crisis waivers before signing the contract.

Some annuities come with limited withdrawal provisions that let you withdraw a portion of your funds without penalty. These withdrawals are usually capped at a specific percentage of the account value each year—typically 10 percent—or a set dollar amount.

However, going over the annual withdrawal limit may still result in a penalty, even after the surrender period has ended.

Be sure to review your annuity contract to check for any free withdrawal provisions and understand the associated terms and conditions.

This strategy involves swapping your existing annuity for a new one without facing immediate tax penalties, similar to a trade-in.

It can be a good option if you’re dissatisfied with the terms of your current annuity but still want to benefit from annuity products.

However, there are important considerations. First, surrender charges may still apply to the original annuity. Second, the new annuity may come with its own fees and a fresh surrender period, meaning you’ll restart the clock on potential surrender charges.

Not all annuities are eligible for a 1035 exchange, so be sure to check with your life insurance company about eligibility.

This method involves selling your future annuity income to a third-party company in exchange for an upfront lump sum payment.

The amount you receive depends on factors like your age, health, and the size of your annuity payments.

You’ll get a discounted amount compared to the total value of your future payments, and you’ll relinquish control over some or all of your guaranteed retirement income.

The discount rate is pivotal in determining your payout. Factoring companies, which purchase annuities, set these rates. The discount reflects the trade-off for immediate access to your funds and allows the buyer to profit from the transaction.

Higher discount rates mean lower payouts for you; for instance, a 10 percent discount rate is preferable to 15 percent.

To maximize your payout, compare quotes from various annuity buyers. Look for the company offering the most advantageous terms to minimize the discount and maximize your cash lump sum.

Annuities are designed as long-term financial products, making it difficult to withdraw funds early. However, there are several reasons you might consider exiting your annuity.

Major life events or changes: Unexpected expenses, job loss, or shifts in your retirement plans may require you to access your funds sooner than anticipated.

Fees and expenses: Some annuities come with high fees that can reduce your returns. If you find a more cost-effective investment opportunity, it might make sense to exit your annuity.

Performance concerns: If your annuity isn’t performing well compared to other investment options, exploring alternatives could be beneficial.

If you recently signed your annuity contract, you may have another option for exiting.

The “free look” period is a consumer protection feature that allows you 10 to 30 days after receiving your contract to review its terms. If you decide the annuity isn’t suitable for you, you can cancel it during this period and receive a full refund of your initial premium without any deductions or penalties.

Exiting an annuity can be complicated. It’s important to carefully evaluate the costs involved, such as surrender charges, taxes, and potential loss of income. Consult with a financial advisor to determine the best strategy for your individual circumstances.