Annuity Surrender Charges and Market Value Adjustments (MVA)

When you purchase a fixed or indexed annuity, you’re making a long-term commitment with an insurance company. In exchange for tax-deferred growth, guaranteed rates, or lifetime income options, the insurer requires you to keep your money invested for a set period. If you withdraw too much too soon, you may face surrender charges or a market value adjustment (MVA). Understanding these terms is crucial before you lock in your contract.

At Diversified Insurance Brokers, we explain the fine print, compare products across 75+ carriers, and design strategies that balance yield, income, and liquidity. If you’re comparing products now, run a quick estimate using our income calculator below.

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What Are Surrender Charges?

Surrender charges are fees applied if you take out more than the allowed free-withdrawal amount during your annuity’s surrender period. Most contracts offer 10% annual penalty-free withdrawals, but amounts above that can trigger charges ranging from 7–10% in early years, decreasing over time.

For example, a seven-year MYGA may start with a 7% surrender fee in year one, stepping down 1% each year until it disappears in year eight. These fees exist to protect the insurer’s long-term investment strategy and discourage short-term use of annuities as liquid savings accounts.

What Is a Market Value Adjustment (MVA)?

A market value adjustment applies when you take withdrawals beyond the penalty-free limit while interest rates have shifted since you purchased your annuity. If rates have risen, your surrender value could decrease further. If rates have fallen, you may receive slightly more than your contract value. MVAs add interest-rate sensitivity to withdrawals during the surrender period.

Not all annuities include MVAs. They are common in MYGAs and some FIAs but rare in SPIAs and DIAs. Our team will explain whether your contract includes an MVA and how it could affect you.

Strategies to Manage Surrender and MVA Risk

• Ladder annuities: Divide funds across contracts with different surrender schedules for staggered liquidity.
• Use free-withdrawals: Take advantage of the 10% annual free-withdrawal allowance rather than full surrenders.
• Align term with goals: Don’t choose a 10-year surrender if you may need funds in 5 years.
• Compare MVA vs. non-MVA products: If you value predictability, non-MVA contracts may be safer.

Learn more about these strategies by reviewing our guide on the fixed annuity ladder strategy, which helps balance yield with flexibility.

When Surrender Charges and MVAs Matter Most

Surrender charges and MVAs typically only apply if you break contract terms early. If your plan is to hold the annuity for the full term or use it for lifetime income, these provisions may never come into play. Still, they’re essential to understand because unexpected withdrawals—such as medical costs or emergencies—can reduce your value if not planned for in advance.

How Diversified Insurance Brokers Helps

We’re an independent fiduciary agency licensed nationwide. We shop 75+ carriers and explain not just rates, but also the contract fine print—like surrender schedules, MVA rules, and liquidity features. If you already own an annuity, we’ll run an annuity rescue plan review to see if repositioning makes sense.

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Talk with an advisor about surrender charges, MVA rules, and the best way to structure your annuity plan.

Related Pages

• current fixed annuity rates
• fixed annuity ladder strategy
• annuity rescue plan