What effect can early withdrawal have on an individual's retirement plan?

Selecting the option that suggests early withdrawal may hinder long-term income potential is accurate because early withdrawals from an annuity or retirement account can diminish the overall growth of the investment. When funds are taken out early, the investment has less time to compound, which can significantly reduce the total savings available at retirement. Additionally, early withdrawals often come with penalties and tax implications that further reduce the effective amount that is saved. As a result, instead of enhancing financial stability in retirement, early withdrawals can lead to decreased income and financial strain during retirement years. This understanding highlights the importance of maintaining annuity investments for their intended duration to maximize their benefits in the long run.