Spread
Some contracts can deduct a spread from the gain each year. Spreads can range from 2.00% to 8.00% (and higher). So, if the index gain is 10%, you are credited with 8% if the spread is 2%.

Withdrawals
Withdrawals up to a certain level during a certain period can be made without any insurance company penalty; most Indexed Annuities allow 1 withdrawal each policy year (excluding the 1st year) up to 10% of the initial premium (or 10% of the premium at the onset of each successive term). In those situations, income taxes will be paid on interest withdrawn; plus a possible 10% excise tax penalty for withdrawals made prior to age 59.5.

Annuitization
Since the backbone and evolution of the tax-deferred annuity is guaranteed income, one may “annuitize” the annuity and receive income for a period of years (period certain) or for life (for example, life only or 10 years certain and life, etc.) Most Fixed-Indexed Annuities will waive surrender penalties if certain conditions are met like selecting a settlement option with a life contingency or annuitizing during the second term or thereafter.