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

Jan 18, 2024

Blueprint Income Team

You have options at the end of your fixed annuity’s guaranteed term. Read on to learn more and don’t hesitate to contact us if you have any questions. We are here to help guide you through the process.

When a fixed annuity reaches 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 policy will be automatically renewed and you may earn a lower renewal rate going forward. Additionally, depending on your contract terms, failing to act before the renewal date can lock you into the new rate for a specified period, potentially subjecting you to charges for withdrawals or surrenders.

What are my goals?

The best action for you depends on your age and goals for the proceeds of your fixed annuity.

Continue tax-deferred growth

To continue tax-deferred growth, you can either move your funds into a new annuity (and potentially earn a higher rate) or stay with your existing annuity (and earn the renewal rate). Blueprint Income has other annuities from your current insurer, as well as annuities from different insurers.

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Moving your funds into a new annuity--whether it’s another fixed annuity or a fixed index annuity--is an event that does not result in any tax liability if processed as a replacement (also known as a 1035 Exchange for non-qualified annuity rollovers).

Generate steady income in retirement

To generate steady income in retirement, consider annuitizing your contract. This will create a stream of guaranteed income that could last for life (and/or a certain period of time, like 10 years). You can set up the payments to start immediately, or you can defer the start date to a future date. Learn more about income annuities.

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.

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If you are under the age of 59 ½, annuitization can be a great option for you, allowing you to avoid the 10% federal tax penalty for withdrawing your annuity’s earnings. The Substantially Equal Periodic Payments (SEPP) exemption provides early access to your retirement funds without penalty if annuitized.

Use the money now

To use the money now, you will need to make a withdrawal. Please keep in mind that any earnings from your annuity are subject to income tax.

Also, if you’re younger than 59 ½, 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.

If you acquired your existing fixed annuity through Blueprint Income you won't incur any surrender fees when withdrawing funds during your 30-day renewal period. We take great care in curating the products we provide to ensure our customers avoid unnecessary surrender charges. Nevertheless, it's worth noting that certain annuities may impose surrender fees once the renewal period is over.

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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