Your Annuity Is Maturing — Here Are Your Options

The Window You Don't Want to Miss

When a MYGA reaches the end of its term, the clock starts.

Most carriers offer a free look window at maturity — typically 20 to 30 days — during which you can surrender the contract, transfer to a new product, or accept the renewal without penalty. Outside that window, you're into the next term and any early withdrawal triggers surrender charges again.

Miss the window through inattention and you've made a decision by default. That's rarely the optimal one.

What Happens If You Do Nothing

If you don't respond during the free look period, most carriers automatically renew the contract at the current renewal rate for the same term.

The renewal rate may be:

• Competitive — close to or above what you could find elsewhere
• Lower — carriers don't always offer their best rate to existing policyholders
• A different term — read the renewal notice carefully

Automatic renewal isn't necessarily bad. But accepting it without checking the market means you don't know whether you're getting a good deal.

Option 1: Renew With the Same Carrier

If the renewal rate is competitive and you want to continue with the same carrier, renewal is the path of least resistance. No forms, no transfers, no waiting period.

Ask the carrier: Is this your best available rate for this term? Is a different term available at a better rate? Sometimes carriers have better rates for different contract years.

Option 2: Do a 1035 Exchange to a New Carrier

If you can find a better rate (or a better product) elsewhere, a 1035 exchange allows you to move the full contract value — including accumulated gain — without triggering a taxable event at the time of transfer.

The mechanics: 1. You (or your advisor) initiate a 1035 exchange request with the new carrier 2. The new carrier coordinates directly with the old carrier 3. Funds transfer carrier-to-carrier 4. Your cost basis carries forward; taxes are deferred until you take a distribution

Important: Do not take a distribution yourself and then deposit it into the new contract. That would be a taxable event. The transfer must be direct between carriers.

Timeline: exchanges typically take 10–30 business days. Initiate well before the free look window closes.

Option 3: Surrender and Take the Cash

If you need the funds — for living expenses, a large purchase, estate purposes, or simply to move to a non-annuity asset — surrender and distribution is an option.

Tax implications:

• The gain portion (interest accumulated above your original premium) is taxable as ordinary income in the year of distribution
• If you're under 59½, a 10% early withdrawal penalty may also apply
• Consider spreading the distribution if the gain would push you into a significantly higher bracket

For large contract values, consult a tax advisor before surrendering.

Option 4: Begin Annuitization or Income

If you purchased the annuity with income in mind, maturity may be the right time to activate income benefits.

For FIAs with income riders, you'd elect the income payout at this stage (if you haven't already). For accumulated non-qualified annuity values, you could annuitize — converting the lump sum into a guaranteed income stream under a SPIA structure.

This is particularly worth considering if:

• You're now at or near the age where you need reliable monthly income
• Social Security or pension alone isn't covering essential expenses
• The account value has grown substantially and you want to convert it to income efficiently

Option 5: Leave It and Wait

If you're outside the free look window and the contract auto-renewed, you'll generally need to wait until the next maturity date (or pay surrender charges) to make changes.

If you're inside the free look window but not ready to decide — take the time the window provides. Get current rate comparisons. Run the tax math on a surrender. Consult an advisor.

Don't let urgency push you into a decision. Don't let inertia make the decision for you.

Before the Window Closes: A Checklist

• [ ] Note the exact date the free look window closes
• [ ] Request the renewal rate from your carrier
• [ ] Compare current MYGA rates from multiple carriers
• [ ] Check if a 1035 exchange to a new product makes sense
• [ ] If you're considering surrender, estimate the tax liability
• [ ] If income is the goal, explore annuitization or income rider election
• [ ] Confirm surrender charges on any new product you're considering

The maturity date is the one moment when all your options are open simultaneously. Use it.