Refinance guide
Should I replace my annuity?
Replacing an annuity is one of the most consequential financial decisions you can make. Done right, it can save thousands in fees, increase your income, or modernize outdated features. Done wrong, it costs surrender charges, lost benefits, and years of progress.
Free tool
Replacement scorecard
Answer 5 quick questions to see how strong the case for replacing your annuity is.
Is your surrender period over or within 1 year of ending?
Are your total annual fees above 2% per year?
Do you lack features you now want (income rider, LTC provision, death benefit)?
Have interest rates or cap rates improved significantly since you bought?
Is your carrier still financially strong (AM Best A- or better)?
When replacing may make sense
Your current annuity was purchased during a low-interest-rate environment and today's products offer materially higher guaranteed rates, cap rates, or participation rates.
Your current annuity charges higher fees than comparable products available now. Variable annuities from the 2000s and 2010s frequently carry total annual fees of 2.5–3.5%+. Modern FIAs may deliver similar or better outcomes at a fraction of the cost.
Your current annuity lacks features you now need — such as an income rider, enhanced death benefit, long-term care provision, or Roth conversion capability.
Your income rider's payout factor is lower than what competing products offer today. The bottom-line dollar income per dollar invested is what matters — not the roll-up rate headline.
Your current carrier's financial strength has deteriorated since you purchased the annuity.
Your surrender period has ended or is close to ending, and you can move to a new product without significant surrender charges.
You own a variable annuity with market risk and high fees, and you want to move to a principal-protected FIA or MYGA for safety and simplicity.
When replacing may not make sense
Your current annuity still has significant surrender charges. Moving to a new product means paying the surrender charge on the old contract AND starting a new surrender period on the new one.
Your current annuity has a valuable income rider with years of roll-up growth already accumulated. Replacing the contract means losing the accumulated benefit base and starting over.
Your current annuity has a death benefit or living benefit that would not transfer to the new contract. Enhanced death benefits, nursing home waivers, and guaranteed minimum values are contract-specific.
The proposed replacement is driven by a salesperson's commission rather than a genuine improvement for you.
You are in poor health and the current contract's death benefit or nursing home waiver provisions are more valuable than any new product's features.
The tax consequences of surrendering a non-qualified annuity would create a significant taxable event. A 1035 exchange avoids this, but a full surrender does not.
The 8-point replacement checklist
Before replacing any annuity, work through each of these questions with confidence.
Surrender charges
What is the remaining surrender charge on your current contract? How much will you lose by moving today vs. waiting until the surrender period ends?
Benefit base / income rider
Have you accumulated a benefit base or roll-up value? How much is it worth? Will the new product's income exceed what you'd receive by staying?
Death benefit
Does your current contract have an enhanced or stepped-up death benefit? Will you lose that protection?
Fee comparison
What are the total annual fees on your current contract vs. the proposed replacement? Include M&E, sub-account fees, rider fees, strategy charges, and spreads.
Rate comparison
How do the current crediting rates (caps, participation rates, fixed rates) compare to the proposed product? Are current rates competitive, or has the market moved significantly?
New surrender period
What is the surrender schedule on the proposed new contract? Are you comfortable with a new lock-up period?
Carrier strength
What is the AM Best rating of the current carrier vs. the proposed carrier? Is the move to a stronger or weaker insurer?
Tax implications
Is the replacement being done as a 1035 exchange (tax-free) or a surrender-and-repurchase (potentially taxable)? If taxable, what is the estimated tax cost?
Your rights under the best-interest standard
NAIC Model Regulation #275
Under the NAIC Suitability in Annuity Transactions Model Regulation (#275), updated in 2020 and adopted by 49 states, any recommendation to replace an annuity must meet the “best interest” standard. The producer must act with reasonable diligence, care, and skill, and must not place their financial interest ahead of yours.
- You have the right to receive a clear comparison of your current contract vs. the proposed replacement.
- The producer must evaluate surrender charges, loss of existing benefits, and whether you'll see a substantial benefit from the replacement.
- Most states provide a free-look period of 10–30 days on replacement annuities during which you can cancel for a full refund.
- If an advisor cannot or will not provide a transparent comparison, that is a red flag.
Frequently asked questions
Can I replace my annuity without paying taxes?
What if I'm still in my surrender period?
Can I replace a variable annuity with a fixed indexed annuity?
How do I know if the replacement is in my best interest?
Explore more
Replacing an existing annuity involves potential surrender charges, loss of existing benefits or riders, new surrender periods, market value adjustments, and tax implications. This content is for educational purposes only and does not constitute financial, tax, or legal advice. All guarantees are backed by the claims-paying ability of the issuing insurance company.
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