Annuities are tax-deferred insurance products which are divided with a QDRO in a Colorado divorce. An annuity is not a retirement plan.
They are sold because they generate very high commissions for the salesman and are profitable for the insurance company.
They are used as stand-alone financial products. Or very often they are inside of an IRA or other tax-deferred financial asset.
Beware of two potential early withdrawal penalties. The first is the standard IRS 10% early withdrawal income tax penalty.
The other more important penalty is the insurance company early withdrawal penalty. In order to keep your money locked up to prevent the liquidation of the annuity, the current early withdrawal time period is about 16 years. Few annuity owners understand this penalty.
Since the annuity is a tax-deferred asset, somewhat similar to an IRA, the cash withdrawals are partially or fully taxable.
Beware that the annuity statement is not indicative of the liquidation value.