Most people buy an annuity, file the contract away and rarely look at it again. That's understandable, since an annuity is meant to be a long-term, low-maintenance part of your plan.
But annuities change after you buy them. Rates reset. Surrender periods end. Your family, health and income needs change too. An annuity that fit perfectly ten years ago may not fit as well today. This guide shows how to get the most value and income from the annuity you already own.
Why a checkup matters
- Your rate may have dropped. Many contracts pay an attractive starting rate that later renews lower.
- Your options may have opened up. Once surrender charges end, you have more flexibility than you may realize.
- Your paperwork may be out of date. Beneficiaries named years ago may no longer reflect your wishes.
- You may be paying for features you don't use. Optional riders carry ongoing fees.
What to check, by type of annuity
| Type | How it works | What to check |
|---|---|---|
| Fixed | Pays a declared interest rate, guaranteed for a set period | Current renewal rate and guaranteed minimum |
| Fixed indexed | Credits interest linked to a market index, with a 0% floor | Current caps and participation rates, rider fees |
| Variable | Invested in subaccounts, so value rises and falls with markets | Total annual fees and how much market risk you hold |
| Immediate | Converts a lump sum into income right away | Beneficiary and payout options on file |
6 Costly Mistakes Annuity Owners Make
Not noticing that your rate dropped
Many fixed annuities guarantee a rate for an initial period, sometimes with a first-year bonus. After that, the insurance company sets a renewal rate, which can be well below what new contracts pay. Many owners never notice, because the change shows up only on an annual statement.
What to do: Compare your current rate with your guaranteed minimum and with what's available today.
Not knowing when your surrender period ends
Most annuities charge a surrender fee for withdrawals above the free amount, often around 10% a year, during the first several years. The charge usually declines each year until it disappears. Once it does, you can typically move or reposition the money without that penalty.
What to do: Find your surrender schedule and mark the date it ends on your calendar.
Exchanging an annuity without doing the math
A "1035 exchange" lets you move money from one annuity to another without triggering taxes. It can be a smart move or an expensive one. A new contract usually starts a new surrender period, and any bonus may come with conditions. In California, annuity buyers age 60 and older also get a 30-day free look period to review a new contract.
What to do: Before any exchange, compare surrender charges, fees, guarantees and benefits side by side, in writing.
Paying for riders you won't use
Optional riders, such as lifetime income or enhanced death benefits, are charged every year, often around 1% or more of a stated value. A rider can be well worth it if you plan to use it. If you never will, its fee quietly reduces your account value year after year.
What to do: List each rider, its annual cost and whether you still expect to use it.
Letting beneficiaries get out of date
Your annuity goes to the beneficiaries named on the contract, not to the people named in your will or trust. Marriages, divorces, births and deaths can leave the wrong person named, or no one. Naming your estate can mean probate and less flexibility for your heirs. Named beneficiaries often have choices that spread out the taxes.
What to do: Confirm your primary and contingent beneficiaries with the insurance company.
Taking money out the costly way
With most annuities bought with after-tax savings, withdrawals come from earnings first, which are taxed as ordinary income. Withdrawals before age 59½ can add a 10% federal penalty. Taking more than the free amount can trigger surrender charges, and extra withdrawals can shrink an income rider's guaranteed benefit.
What to do: Before withdrawing, check the free amount, the tax cost and the effect on any guarantees.
Your Annuity Checkup
Use your most recent annual statement. Blanks are fine, since they show what we should look up together.
A. Contract basics
B. Quick check
Your next step: a free annuity review
In a no-obligation review, we'll go over your checkup, read your statement together and explain in plain language what your annuity is doing for you today. If it's still the right fit, you'll know for sure. If it's not, you'll see your options, including the costs and trade-offs of each.
What to have available for our meeting (whatever you have is fine):
- Your completed annuity checkup
- Your most recent annual statement for each annuity
- Your contract or policy, including any rider pages
- Last year's tax return, if you're taking withdrawals or payments
Email: rick@rickliuagagency.com
Important disclosures
This material is for educational purposes only and is not a recommendation to buy, sell, keep or exchange any product. Examples and typical figures are general and vary by contract. Guarantees are based on the claims-paying ability of the issuing insurance company. Annuities are not FDIC-insured, are not bank deposits, and are not guaranteed by any bank or government agency. Withdrawals may be subject to surrender charges and ordinary income tax, and a 10% federal penalty may apply before age 59½. Riders carry additional fees and limitations. An exchange may involve new surrender charges, fees and a new surrender period, and may cause the loss of existing benefits; compare carefully before replacing any contract. Tax information is general, based on federal law as of 2026, and subject to change. Rick Liuag Insurance and Financial Services does not provide tax or legal advice; consult your tax advisor. Insurance products offered through Rick Liuag Insurance and Financial Services, CA License #0E72518.
About Rick Liuag
For 37 years, Rick Liuag has helped people protect two things that matter most: the income they'll live on and the savings they've worked hard to build.
Rick works primarily with pre-retirees, retirees and small business owners, people who have spent decades building something and want to make sure it lasts. His clients often come to him with the same questions: Will my savings last as long as I do? What happens if the market drops right before I retire? How do I protect my family from a big, unexpected expense?
He writes his guides in plain language, explains the trade-offs along with the benefits, and never recommends something that doesn't fit. His clients always know how a plan works, what it costs and how he's paid before they decide anything.
Rick Liuag, Certified Pension/Retirement Advisor
Rick Liuag Insurance and Financial Services · Corona, CA
CA License #0E72518 · Also licensed in TX, NV, SC, GA and FL
951-515-0292 · rick@rickliuagagency.com
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