Systematic withdrawal is a method of withdrawing funds from an annuity account by which the annuitant withdraws funds from the account in specified amounts for a specified payment frequency. The annuitant is not guaranteed lifelong payments as he or she is with the standard annuitization method. With the systematic withdrawal schedule, the annuitant chooses instead to withdraw funds from his or her account until it is emptied, bearing the risk that the funds become depleted before he or she dies.
This method of fund withdrawal from an annuity, by not guaranteeing a lifelong income stream for the annuitant, places the risk of a longer-than-expected lifespan on the shoulders of the annuitant instead of on the insurance company offering the annuity. An annuitant choosing this withdrawal method instead of the annuitization method would not be limited to a small amount of funds every month, and could in fact remove his or her funds from the account relatively quickly, should he or she desire to do so. 
Systematic withdrawals can be established using:
- A fixed dollar amount
- A fixed percentage amount
With an annuity, a systematic withdrawal is taxed as income first, basis last. Thus all withdrawals are 100% taxable until all the appreciation in the annuity has been withdrawn.