Investors routinely review their stock and bond portfolios. They rebalance allocations and compare performance as conditions change. Annuities, however, are often treated differently.Once an annuity is purchased, it can sit untouched for years or even decades. The contract may continue doing exactly what it was designed to do, but that doesn’t necessarily mean it’s still the best option available.Annuities are long-term financial products, but they shouldn’t be seen as assets you can “set it and forget.” Periodically reviewing an existing annuity can help determine whether the contract remains competitive and, more importantly, whether it still accomplishes what you need it to.The annuity market has changedThe past several years provide a particularly good example of why reviews can matter.Interest rates rose substantially from the historically low levels of the early 2020s. That change affected the economics of many annuity products, particularly fixed annuities and income annuities.Investor demand has been significant. According to LIMRA, U.S. retail annuity sales reached a record $464.1 billion in 2025, up 7% from 2024 and marking the fourth consecutive year of record sales. Fixed-rate deferred annuities accounted for $165.3 billion of those sales.About Adviser IntelThe author of this article is a participant in Kiplinger’s Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.A contract purchased five, 10 or 15 years ago was designed in a different economic environment. Meanwhile, insurers have introduced new products, new income riders, different crediting strategies and different pricing.That makes a simple question worth asking:If you were making the decision today, would you still choose the annuity you currently own?The forgotten fixed annuityOne area particularly worth reviewing is an older fixed annuity that has reached the end of its initial guarantee and surrender-charge periods.Fixed deferred annuities generally credit a stated interest rate for a specified period. After that period ends, the insurance company establishes a renewal rate. That rate can change over time but can’t fall below the guaranteed minimum interest rate stated in the contract.Consider an investor who purchased a fixed annuity years ago, allowed the surrender period to expire and simply left the money in the contract. The money may now be fully liquid from a surrender charge standpoint, but the contract could be earning a renewal rate well below rates available on newly issued annuities.On a $250,000 annuity, a two-percentage-point difference in annual interest represents $5,000 in the first year alone. If that difference persists, its effect compounds over time.For owners of older fixed annuities, this can be an especially important opportunity. Once the surrender period has expired, there may be little reason to leave substantial assets earning a low renewal rate when significantly higher guaranteed rates may be available elsewhere. A contract earning 2% when comparable new annuities are offering 4% or 5% can create a meaningful drag on retirement assets over time.That doesn’t automatically mean an exchange is appropriate. But it does mean the contract deserves a review. Once an annuity is surrender-charge-free, continuing to accept a below-market rate simply because the money is already there can be costly.The end of an annuity’s surrender period can be an ideal time to review the contract and compare it with current alternatives.Start with the original purposeBefore comparing rates or shopping for another contract, remember why you bought the annuity in the first place.Was it intended to: Provide guaranteed lifetime income?Protect principal?Accumulate money at a competitive fixed rate?Provide tax-deferred growth?Create income for a surviving spouse?Leave a death benefit?That original objective becomes the benchmark for evaluating the contract today.Someone who purchased an annuity primarily for guaranteed retirement income, for example, should focus on the income the contract can ultimately produce, not simply its current account value.Another investor may own a fixed annuity primarily as a conservative accumulation vehicle. In that case, the crediting rate, remaining guarantee period, surrender schedule and renewal terms could be more important.The right comparison depends on what you’re trying to accomplish.What should an annuity review include?A meaningful review should go beyond looking at the account balance and should include the following questions:What is the contract currently earning?When does the current rate or guarantee period expire?What is the current surrender value?Are surrender charges still applicable?What income or withdrawal benefits are guaranteed?Is there an income benefit base substantially higher than the account value?What fees or rider charges are being assessed?What death benefits would be lost by making a change?How does the financial strength of the insurer compare with alternatives?What would comparable contracts available today provide?For an income annuity or an annuity with a lifetime income rider, one useful exercise can be surprisingly simple: Compare the income the existing contract can generate with the income available from alternatives using the same amount of money and a comparable starting date.The comparison may reveal an opportunity to increase guaranteed income, or it may confirm that the existing contract remains the better option. Either outcome provides valuable information.A 1035 exchange can provide flexibilityOne reason annuity owners may have options is Section 1035 of the Internal Revenue Code.When its requirements are satisfied, an existing annuity can generally be exchanged directly for another annuity without recognizing the investment gain at the time of the exchange. This can allow an investor to move from an older contract into one better suited to current needs without first liquidating the annuity and triggering taxation on accumulated gains.But favorable tax treatment alone is never a reason to make an exchange.A new contract may restart a surrender-charge period, impose different fees or cause the owner to give up valuable guarantees accumulated under the existing contract. FINRA specifically cautions investors considering annuity exchanges to compare existing and proposed contracts closely, including surrender charges, costs and potentially valuable benefits that could be lost.In other words, the goal isn’t to replace an old annuity. The goal is to determine whether it should be replaced.Sometimes the best recommendation is to do nothingThis may be the most important part of an annuity review.Older contracts can contain benefits that are difficult or impossible to duplicate today.A lifetime income rider purchased years ago may have accumulated a substantial benefit base. An older variable annuity might contain valuable income or death-benefit guarantees. And replacing an existing contract may start an entirely new surrender period.Giving up those benefits simply because a new product has a higher headline rate can be a costly mistake.That’s why a review should compare the entire economic value of the existing contract with the alternative rather than focusing on a single number.Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel, our free, twice-weekly newsletter.Treat annuities as part of your portfolioInvestors don’t assume that the stocks, bonds or mutual funds they purchased 10 years ago are still the best options today. Changing markets and personal circumstances justify periodically revisiting those decisions.Annuities deserve similar attention.That doesn’t mean constantly moving money from one contract to another. Annuities are designed to be long-term products, and unnecessary replacements can undermine the very benefits they’re meant to provide.Instead, consider reviewing annuities periodically, particularly when a surrender period ends, interest rates change significantly or your retirement needs and financial objectives evolve.The question isn’t whether something newer exists. That will always be the case.The better question is whether the annuity you already own remains competitive and continues to serve the purpose for which you bought it.For some investors, the answer will be yes.For others, a review may uncover an opportunity to improve income, guarantees, accumulation potential or flexibility.Either way, your annuities deserve the same periodic review as the rest of your financial portfolio.Related ContentConfused by Annuities? Making Sense of the Different TypesIncome and Life Expectancy Not Adding Up? An Annuity Could Solve the EquationFive Options for Retirees Who No Longer Need Life InsuranceI (Used to) Hate Annuities: Then I Looked at the MathThe Truth About Annuities: The Question Isn’t ‘Are They Good or Bad?’ It’s ‘Are They Appropriate for You?’This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Why You Shouldn’t ‘Set and Forget’ Your Annuity
