A deferred annuity is an insurance policy with two phases -- accumulation and payout. The accumulation phase is when your annuity is earning interest, and the payout phase is when you take a guaranteed income from the annuity. If your annuity is in the accumulation phase, you can move it to another company, or a new annuity with the same company. Make sure to read all the fine print and that moving your annuity makes financial sense.
Contact your insurance company for information on your current annuity. Ask what the current balance is, and what the current interest rate is. If it's a variable annuity, find out what it has earned since you initially started the annuity. Also ask if there are surrender charges. If there are surrender charges, find out how much those charges are.
Choose a new annuity. Make sure that the annuity improves your situation through increased interest or an improved portfolio. Become familiar with the new policy's surrender charges and penalty-free withdrawal provisions. Most annuities allow you to withdraw up to 10 percent of the annuity's value each year without any surrender charges.
Complete your application for a new annuity. Be thorough, and if you're working with an insurance agent, make sure the application is completely filled out in front of you, and that you receive all the paperwork to which you're entitled. There should be an explanation of the annuity you're taking out and a copy of your 1035 exchange form. This form allows you to move your annuity without any tax consequences. Also make certain you've designated your beneficiaries.
Review your new policy. You have a free-look period of 10 to 30 days, depending on your state, to review your policy and back out of it if you choose to with no charges or penalties. Your free-look period begins the date you receive your policy. Double check the surrender charges, the interest rate or make-up of your portfolio, and that your beneficiaries are correct. If any changes need to be made, contact your insurance company.
- Shop around for the annuity that's best for you. Look for low surrender charges that last less than 10 years.
- Don't let yourself be pushed into purchasing a new annuity by an insurance agent. Take your time and make sure moving your annuity improves your situation.
- If you're a senior, make sure your new policy has provisions for you to access your funds if you need long-term care. Otherwise, you may incur significant surrender charges if you need to withdraw money shortly after you've started your new policy.
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