Retirees may withdraw money from an annuity as a lump sum or series of partial payments, reports Market Watch. Withdrawals from annuities are subject to the standard income tax on earnings, states CNN Money. Early withdrawals may also subject to 10 percent penalty tax and surrender charges.
One option for partial payments of annuity withdrawals is a 'single life' annuity, in which payments are calculated over the lifetime of the annuity owner, according to Market Watch. With '50 percent joint-and-survivor' annuities, the owner gets lifetime payments and the surviving spouse gets half the amount in payments for life. With '100 percent joint-and-survivor' payments, owner and surviving spouse get equal but smaller payments over both lifetimes. 'Life with X-years-certain' payments guarantee a set amount of payments regardless of when the owner dies, while 'term-certain' payments offer a fixed number of payments regardless of the time of death of owner or spouse.
The IRS considers withdrawals from annuities early if they are made before the owner reaches 59 1/2 years of age, reports CNN Money. Owners who withdraw funds from annuities less than five to seven years after they are set up usually owe surrender charges to the insurance companies ranging from 7 to 20 percent, depending on the specific annuity plan rules.