Annuities✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A consumer asks how much it would cost to take money out of a deferred annuity during the early years. The producer should explain that a surrender charge:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Deferred annuities commonly impose a surrender charge on withdrawals during an early surrender-charge period — typically a percentage of the account value that decreases each contract year until it reaches zero. Liquidity and surrender-charge disclosure is part of the suitability conversation, and State senior-citizen rules require prominent notice that cancellation after the free-look period may result in a surrender charge. The charge declines over time rather than being flat.
Why the other options are wrong
- B) Surrender charges are tied to contract duration, not the annuitant's age; they run on the surrender-charge schedule, not an age trigger.
- C) Surrender charges are permitted on annuity contracts; State law mandates disclosure of them, not prohibition.
- D) The charge is a declining percentage over the surrender period, not a fixed flat amount at all times.
Memory hook
Surrender charge = the early-exit toll that shrinks every year until the toll booth disappears.