Time to Upgrade Your Annuity?

50s working at homeMany of today’s annuities have features that were not available years ago. If you have an existing annuity, it may be worth looking at the options provided by today’s newer annuities to see if they offer features that better serve your retirement income needs.


There are possible advantages and disadvantages that have to be considered on a case-by-case basis. Some things you may want to consider when deciding to upgrade your annuity include:


Guarantees of the new contract


If your existing annuity guarantees a higher return than what is currently available, it may not make sense to replace your existing annuity.


If, however, better guarantees are available with a new annuity and there are newer features that better meet your retirement goals, it may be worth exploring.


For example, a fixed index annuity with an income rider may offer lifetime income guarantees that provide more money during retirement.


Possible penalties


Most annuities have a surrender period. Many also have a bonus. How soon will you need the money? Does the bonus make up for some of the surrender period?


Your contract will specify how long the surrender period is and the amount the penalty decreases over time.


Also check for possible Market Value Adjustments (MVA) that could affect the value of your annuity if you surrender it.


Tax considerations


In order to avoid creating a taxable event, the IRS requires the exchange of one annuity for another to be done as a 1035 exchange. The only requirement is, the new annuity must be on the same insured.


When you roll an “old” annuity into a new one within a 1035 exchange, you maintain the cost basis you had in the original annuity. A 1035 exchange can be done to consolidate more than one annuity into a new annuity contract.


Whether you should upgrade your existing annuity or keep the one that you have is something that can only be determined by reviewing your current contract. If you have old annuities and want to find out if today’s new features better meet your retirement needs, please contact us for a no obligation review.