You purchased y0ur annuity 8 years ago and time has flown by. Now the annuity company has contacted you by mail and wants to know if you want to renew. Renewing annuities obtained a few years ago could be locking in lower renewal rates than those wanted to you when you first made the particular investment. Your choices with regard to annuities renewing:
- accept a one year low rate and then make a more permanent decisions at the end of the year
- renew for another 8-year term
- transfer the particular annuity and to another insurance company in attempt to find a better deal
You could also secure a new fixed annuity that offers a multi-year rate guarantee period that extends from 5-10 years from your annuity company (if they offer it). Of course, this will start a new schedule of surrender charges that apply to withdrawals prior to the end of the new term. Annuities surrender charge schedules vary from one annuity company to another so shopping is always advised. Be aware that if the agent you use only sells annuities from one company (i.e. is a captive agent), you won't see many of the options available to you.
As opposed to renewing with the same company, you could simply change your annuities by opting for another annuity company that offers you better annuity rates or perhaps multi-year rate guarantee options. By making certain you have taken care of all the demands required by the Internal Revenue Code section 1035 which dictates the exchanges of annuities between companies, you will not incur any federal income taxes pertaining to 'exchanging' your old annuity. Note that agents often encourage you to switch companies at renewal time because they typically get a larger commission from a new company than having you renew with the old company. Just make sure the switch of annuities is advantageous for you.
Also important, will be checking the renewal rate history of the insurance annuity company you're looking at. This data is available from the annuity company for you to review. Did the company give a preferable rates on annuities to new customers than provided on their annuity renewals to existing customers?
Always remember the following:
- take the motivation of the annuities agent into account--ask what his commission will be from each annuity company and see if he has any self-serving interest in his recommendation
- an independent agent will provide more options than a captive agent regarding annuities
- ALWAYS read the annuity contract before you invest or during the free-look period, typically 30 days after which you invest that allows you to cancel your investment if not happy