What Are My Options at the End of My Fixed Annuity Guaranteed Term?

Oct 4, 2022

Blueprint Income Team

You have options at the end of your multi-year guaranteed annuity (MYGA) guaranteed term. Read on to learn more and contact us if you have any questions.

When a fixed annuity (Multi-Year Guaranteed Annuity, or MYGA) has reached the end of its guaranteed investment term, it doesn’t mean that a check will automatically be mailed to you. In fact, unless you act, your annuity will continue and you may earn a lower renewal rate going forward. And, depending on your contract, if no action is taken before the renewal date, the new rate may be locked in for a period of time with potentially additional surrender charges for withdrawals or surrenders.

In general, at the end of the guaranteed interest rate term, you can do any of the following:

The best option for you will depend on your age and your goals for the proceeds of your fixed annuity. Here’s why someone would choose each of these options:

Rollover into a new fixed annuity

One option is to rollover your funds into a new fixed annuity, tax penalty-free. This is processed as a replacement (also known as a 1035-exchange for non-qualified annuity rollovers). You’ll be offered new crediting rates according to the new term and/or new product selected, which may be higher or lower than your prior rate depending on market conditions. You can select a product offering from your current insurer, or review options from a different insurer. Visit our fixed annuities marketplace to explore insurer and product options.

This option may be appropriate if you want:
  • To continue growing your assets
  • To continue tax deferral growth
  • Better rates & more options to choose from, as options in product and carrier availability may have changed since your original purchase
Annuitize your policy

At the end of your fixed annuity guaranteed term, you can annuitize your contract, which means to create a stream of guaranteed income that could last for life (and/or a certain period of time, like 10 years). Annuitization can happen in one of two ways: via your current insurer’s options, or by purchasing an income annuity from a different insurer. Before you decide to annuitize, compare the income benefit being offered by your insurance company with others currently available in the marketplace. You can run your own quotes here.

This option may be appropriate if you want:
  • To generate steady income in retirement that you can't outlive
  • To avoid the 10% federal tax penalty, if you are under the age of 59 ½: the Substantially Equal Periodic Payments (SEPP) exemption provides early access to your retirement funds without penalty if annuitized.
Auto-renew your policy

If no action is taken by you, the insurance company will continue to invest your money, but you may earn a lower renewal rate going forward. Depending on your contract, your auto-renewed rate may be locked in for periods of time and may include surrender charges for withdrawal.

This option may be appropriate if you prefer:
  • The ease of doing business: you wish to accumulate money in an annuity and the issuer is paying a competitive renewal rate



Cash out

One last option is to withdraw your money. In most cases, you will not need to pay any surrender charges, as they no longer apply once your term ends. However, some annuities have surrender charges that continue past the end of the initial (and perhaps subsequent) investment terms.

This option may be appropriate if you want:
  • To use the money now

Note: the amount you've accumulated in your annuity is subject to income tax. Also, if you’re younger than 59½, there is a 10% federal penalty on the gains. This penalty is the flip side of the tax-deferral you’ve been receiving, a benefit afforded by the government to encourage retirement savings. As such, they want to help ensure you are using the money in retirement. If you are younger than 59 ½, we suggest you explore the options listed above.

Have questions? We're here to help. Schedule a call with an annuity specialist today.

Blueprint Income Team

We are a team of finance, insurance, and actuarial professionals working to make it easier for everyone to achieve a steady and comfortable retirement. We write about annuities (the good and the bad) and provide strategies to help Americans prepare for retirement.

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