Your Annuity's Renewal Rate May Be Quietly Underpaying You

When you bought a fixed annuity or a fixed indexed annuity, there was a surrender period attached to it, maybe seven years, maybe ten. During that stretch, pulling out more than the free withdrawal amount meant paying a charge. So you left it alone. That was the right move at the time.

Here's what most owners don't realize: the surrender period ending doesn't trigger anything. No letter arrives saying your money is free now and here are your options. The contract just keeps renewing on its own, year after year.

What Happens After the Surrender Period Ends

After that period is over, many contracts credit what's called a renewal rate. That rate is set by the insurance company, and it's often lower than what the same company, or a different company, is offering to brand-new money today.

That means you can have a contract doing exactly what it was designed to do and still be earning less than it could, simply because nobody checked it.

You can have a contract that's doing exactly what it's supposed to do and still be earning less than it could simply because nobody looked at it.

How to Check Your Own Contract

This isn't complicated to look into. Find your contract. Look at the issue date and the surrender schedule. If the surrender period is over, compare what you're being credited now with what's available today, whether that's from your current insurance company or elsewhere.

Sometimes staying put is the right answer. The point isn't to assume you need to move money. The point is to actually know, instead of finding out years later that a better rate was sitting right there the whole time.

If You Do Decide to Move Money

One caution here. If you compare rates and decide a different option makes sense, how you move the money matters just as much as the decision to move it.

A direct transfer between insurance companies, sometimes called a 1035 exchange for non-qualified annuities, keeps the tax treatment intact. Cashing out and writing a new check yourself can create a tax bill you didn't need to create.

This isn't something to handle on your own off a website. Get it reviewed before you act.

The Bottom Line

A renewal rate isn't a red flag by itself. It's simply what an insurance company sets once the surrender period is behind you, and it can move independently of what new money is earning elsewhere. The only way to know if your rate is still competitive is to check the issue date, confirm the surrender period has ended, and compare the number you're being credited against what's currently available.