Tradeoffs to Consider Withdrawals of annuity earnings are taxed as ordinary income and may be subject to a 10% federal income tax penalty if made prior to age 59½. Withdrawals reduce annuity contract benefits and values. Most annuities have surrender charges that are assessed if the contract owner surrenders the annuity. Generally, annuities have contract limitations, fees, and charges, which can include mortality and expense charges, account fees, investment management fees, administrative fees, charges for optional benefits, holding periods, termination provisions, and terms for keeping the policy in force. Any annuity guarantees are contingent on the claims-paying ability and financial strength of the issuing company. Annuities are not guaranteed by the FDIC or any other government agency. They are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association. A variable annuity is a long-term investment vehicle designed for retirement purposes. The investment return and principal value of the variable annuity investment options are not guaranteed. Variable annuity subaccounts fluctuate with changes in market conditions. The principal may be worth more or less than the original amount invested when the annuity is surrendered.