Definition of "Premature Withdrawal"

The withdrawal of cash from an annuity before the owner reaches age 59 1/2 (unless he or she is disabled or dies). Withdrawals of taxable amount prior to age 59 1/2 are subject to a 10 percent federal tax penalty. Early withdrawals are usually also subject to a certificate surrender charge.

Taking cash out of an annuity before investor reaches the age of 59 1/2. Subject to a 10% federal tax penalty in addition to any income taxes that may be due, and possible policy surrender charge from the insurance company. See Surrender Charge.