Annuities obtained a few years ago could be giving lower renewal rates than those agreed to when you first made the particular investment. Many an annuity company might make you such an unattractive long term offer that the only reasonable option is a "wait and see" approach by taking their one year rate of 1%. One other alternative would be transferring the particular annuity and choosing another annuity company to try and obtain another long-term, locked-in rate guarantee that is attractive (i.e. a multi-year guarantee annuity).
Although, from your long-term perspective a one-year annuity rate lock is probably not a bad option. Besides, most any annuity company offers this option which allows you to see if rates will be better ion a year. While getting a reasonable return, albeit below what you expected, you might choose to stay with the same company in a year or instead, opt for another annuity company or another annuity contract with different annuity rates.
You could also secure a fixed annuity which that offers a multi-year rate guarantee period that extends through between 5-10 years from your annuity company. These CD-type annuities typically pay 1% more than a bank CD of equal maturity. Of course, this would be a new contract with a new schedule of surrender charges lasting 5- 10 years. Annuity surrender charges vary from one annuity company to another so it is one element for comparison.
Note that IRA allows you to freely move funds from one annuity company to te other without any tax effect. By making sure you have taken care of all the demands listed by the Internal Revenue Code §1035 (rules that your annuity agent must know), you will not incur any federal income taxes or penalties with regard to 'exchanging' your old annuity. However, depending on the contract terms with your annuity company, surrender charges could apply so it is unwise to move funds from an annuity prior to term. In relation to switching your annuity company, therefore, you must check that the new benefits you receive will offset any costs incurred by the switch.
Also important, is actually checking the renewal interest rate history of the new annuity company. You will definitely get an idea of the rate that the annuity company supplied its past clients at renewal time. Examine if the annuity company offers existing clients lesser rates as compared to rates offered to attract new investors.
When shopping for ther right annuity company, you want to consult an independent agent that is not beholden to one company. You may even consult a few independent agents as each typically focuses on their favoritete six or so annuity companies. There is no annuity company marketplace where you can see what all companies offer in one place and very few companies will deal with you directly and will only deal through an agent.
Leave a Reply