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In 2009, Ted purchased an annuity for $60,000. The annuity is to pay him $1,500 per month for the rest of his life. His life expectancy is 120 months. A). Ted is not required to recognize any income until he has collected 40 payments (40 $1,500 = $60,000).
Surrender Charges. Annuity contracts are issued by insurance companies for a specified investment term, typically from four to seven years. For each year the investment is held, the penalty for early withdrawal changes, getting lower the longer the annuity is held. This is called a surrender schedule.