If your annuity surrender period ended and you are wondering what now, the most important thing is simple: do not let the renewal window pass by default. You usually have a short period to renew, move the money to a new annuity through a tax-free 1035 exchange, take the cash, or turn it into income, and the Fed’s September 16 rate hike makes it worth comparing all of those options before the carrier decides for you.

What happens when an annuity surrender period ends?

When a multi-year guaranteed annuity (MYGA) or other fixed annuity reaches the end of its term, the surrender charges stop applying for a short stretch. The NAIC’s Buyer’s Guide to Fixed Deferred Annuities describes it this way: you are usually given a short period of time, called a window, to decide whether to renew or surrender, and if you renew, the surrender charges may start over.

How long that window lasts depends on your contract. F&G, for example, describes a 30-day window at the end of each guarantee period on its MYGAs, after which a new guarantee period and a new surrender charge period begin. Other carriers set different windows, so pull out your contract or call the carrier and get the exact dates in writing.

This matters more than people think. If you do nothing, many contracts simply roll into a new term at whatever renewal rate the carrier sets, and your money is locked up again.

Why are so many annuities coming out of surrender right now?

A lot of money went into fixed annuities when rates jumped. LIMRA reported that fixed-rate deferred annuity sales, the category that includes MYGAs, hit $164.9 billion in 2023, up 46 percent from the prior high of $113 billion in 2022. Contracts bought in 2023 with three-year terms are reaching the end of their guarantees now, and longer terms will follow over the next few years.

Owners tend to act when the charges go away. A LIMRA and Society of Actuaries study covering 2015 to 2022 found that surrender rates peaked in the year the surrender charge expired, at 38.6 percent by contract count and 46.3 percent by contract value, InsuranceNewsNet reported in August 2024. In 2020, 2021, and 2022, that expiration-year surrender rate ran above 50 percent by contract count.

What did the Fed just do, and why does it matter for my annuity?

On September 16, 2026, the Federal Open Market Committee unanimously raised the federal funds target range by a quarter point to 3.75 to 4.00 percent, according to the Federal Reserve’s September 16 statement. The statement said plainly that “inflation remains elevated.”

It was the Fed’s first rate increase in three years, Yahoo Finance reported. The officials’ median projection points to one more quarter-point hike before the end of 2026, according to a separate Yahoo Finance breakdown of the Fed’s forecasts.

The Fed does not set annuity rates, and insurers reprice on their own schedule. I walked through that relationship in more detail in my post on whether annuity rates are going down. The practical point is that a rising rate backdrop gives you more reason to shop your renewal rather than accept it.

Why is my renewal rate lower than what new buyers are offered?

It is one of the most common surprises at renewal time. The NAIC’s 2022 Buyer’s Guide for Fixed Deferred Annuities notes that after a rate period ends, the insurer sets a new rate that “could be higher or lower than the earlier rate,” and only the contract’s minimum rate is guaranteed.

Part of the reason is how carriers credit interest. Some use a portfolio method, where renewal rates reflect the yield on the whole pool of bonds the insurer already owns, while new-money rates reflect what the insurer can earn investing fresh premium today. When market rates have risen, that older pool can lag behind.

The other reason is candid business reality. In my experience, carriers compete hardest for new money, and a renewing owner who does nothing is not a customer they have to win.

What are my options when the surrender period ends?

I can’t give individual advice, and nothing here is a recommendation for your situation. Please check with a tax professional before you act on anything involving taxes. With that said, here is how the choices generally work.

1. Renew with your current carrier

Renewing is the easiest path, and it can make sense if the renewal rate is competitive and you like the company. Just know that renewing may restart the surrender charges, so you are making a new commitment, not just continuing an old one.

2. Move to a new annuity with a 1035 exchange

The IRS says in Publication 575 that no gain or loss is recognized when you exchange one annuity contract for another if the annuitant stays the same. The money has to move directly between insurance companies, and your cost basis carries over to the new contract.

The tradeoffs are real. FINRA warns that an exchange usually means the clock restarts for early withdrawal penalties and can bring less favorable benefits or higher fees. If your current contract has a rider, a bonus that is still vesting, or a death benefit you value, find out exactly what you would give up before you sign anything.

3. Take the cash

You can surrender the contract during the window without surrender charges. For a nonqualified annuity, the IRS says withdrawals before the annuity starting date come out of earnings first, and those earnings are taxable as ordinary income.

If you are under age 59 and a half, the taxable part may also face a 10 percent additional tax, according to IRS Publication 575, with some exceptions. Annuities held inside an IRA follow different rules, which is another reason to talk to a tax professional first.

4. Annuitize

You can turn the balance into a stream of income, either with your current carrier or with another one through an exchange. For a nonqualified annuity, the IRS General Rule treats part of each payment as a tax-free return of your cost, based on the ratio of your cost to the expected return.

5. Ladder the money

Laddering means splitting the balance across a few terms, such as three, five, and seven years, so a portion comes due at different times. With the Fed signaling that rates may still move, some people use a ladder so they are not betting everything on a single renewal date.

What should I ask my carrier before the window closes?

Call the carrier, not just the agent who sold you the contract, and get these answers in writing:

  • What is the exact start and end date of my surrender-free window?
  • What renewal rate will I get, how long is it guaranteed, and what is the minimum guaranteed rate?
  • If I renew, does a new surrender charge schedule start, and what does it look like year by year?
  • Is there a market value adjustment on this contract, and does it apply during the window?
  • Do I have any rider, bonus, or enhanced death benefit that I would lose if I exchange or surrender?
  • What is my current cost basis, and how will a surrender be reported for taxes?
  • What paperwork does the carrier need to release funds for a 1035 exchange, and how long does it usually take?
  • Does the contract have a bailout provision tied to the renewal rate?

Once you have the renewal offer, you can compare current MYGA rates by term and carrier to see how it stacks up. If your annuity surrender period ended and you are still asking what now, the answer starts with that renewal letter and a side-by-side comparison before your window closes.

Frequently Asked Questions

What happens if I do nothing when my annuity surrender period ends?

In many contracts, the annuity automatically renews into a new guarantee period at the carrier’s renewal rate. That can restart the surrender charges, so check your contract for the exact renewal terms.

Is a 1035 exchange taxable?

An exchange of one annuity for another is generally not a taxable event under IRS rules, as long as the annuitant stays the same and the money moves directly between insurers. It can still start a new surrender period, so compare the contracts carefully.

How long is the window after a surrender period ends?

It varies by contract. Some carriers use a 30-day window, but yours may be shorter or timed differently, so confirm the exact dates with your carrier.

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