Dev Gaymes · Texas-licensed life insurance agent ·
NPN 16654074
September 24, 2026 · 12 min read · Last reviewed September 2026
I get paid when you buy a new annuity.That is exactly why I spend as much time here on when not to switch as on when to. Replacing an annuity is one of the most regulated transactions in insurance, and for good reason. I am a licensed insurance broker, not a tax advisor or investment adviser.
If you bought a fixed or fixed index annuity in 2020 or 2021, it was priced during the lowest-rate period in decades. A typical five-year fixed annuity then paid roughly 2.1% to 2.25%. In late summer 2026, A-rated carriers were paying roughly 5.3% to 6.0% depending on term.
So it is natural to ask whether to move it, much like refinancing a mortgage. Sometimes that is exactly right. But the costs of getting out of an annuity are often larger and harder to see than refinancing costs, the same rise in rates that makes new contracts attractive can make your current one more expensive to leave, and if you are already drawing income, the whole question changes.
First: which phase is your annuity in?
The answer depends less on today's rates than on what your annuity is doing for you right now.
| Where you are | What matters most | Switching usually |
|---|
| Accumulating, no income rider | Your rate or caps against the costs of leaving | Makes sense once the surrender period and any market value adjustment are behind you |
| Accumulating, with an income rider you plan to use | The benefit base you have built | Rarely makes sense while the benefit base sits well above the account value |
| Drawing lifetime income from a rider | Your guaranteed income amount | Usually costs income; compare income to income, not rate to rate |
| Annuitized, with payments locked in | Nothing to move | Generally not possible; higher rates matter for money not yet annuitized |
| Taking free withdrawals or RMDs | Access to your money | Check the new contract's withdrawal and RMD terms before anything else |
General patterns only. Every contract's terms differ; the details of yours decide the answer.
Why an older contract can lag
- Fixed annuities (MYGAs) lock a rate for the guarantee term. Once it ends, the insurer sets a renewal rate, which may sit well below what new contracts pay.
- Fixed index annuities reset caps and participation rates each year at the insurer's discretion, above the contract's guaranteed minimums. Those rates are funded largely by bond yields, so new contracts improved as rates rose. Whether your existing contract's renewal rates followed depends on the carrier, which is why renewal rate history matters so much.
- Income riders and payout rates on newer contracts may offer different roll-up rates or payout factors than the one you bought.
The four costs of switching
This is the part the refinance comparison hides, and it applies in every phase.
- Surrender charges. Many contracts sold in 2020 and 2021 carried seven- to ten-year surrender schedules, so a lot of them are still inside the period. Most allow around 10% a year out without a charge; beyond that, the charge applies.
- A market value adjustment. Many contracts include an MVA that changes what you receive on an early surrender depending on where interest rates have moved. When rates have risen since you bought, as they have since 2021, the adjustment usually reduces what you get back. The higher rates that make switching attractive also make leaving early more expensive.
- A new surrender period. The new contract starts its own schedule, often seven to ten years again.
- Benefits that do not transfer. If your contract has an income rider, the benefit base you have built up usually does not move with you; only the contract value does. Enhanced death benefits and other features can be lost the same way.
If you are still in the accumulation phase
This is where refinancing most often makes sense, and where timing decides almost everything. Both cases below start with $200,000 in a fixed annuity bought in 2021 at 2.25%.
| Stay | Switch now | Difference |
|---|
| Two years left in the surrender period (4% charge, 3% negative MVA), new 2-year contract at 5.00% | $209,101 after 2 years | $186,000 after costs, growing to $205,065 | About $4,000 worse |
| Surrender period over, renewing at 2.50%, new 5-year contract at 5.75% | $226,282 after 5 years | $264,504 after 5 years | About $38,000 better |
Hypothetical illustrations only, not quotes or offers. Assume rates hold for each period, ignore the free withdrawal amount and taxes, and use an illustrative MVA; actual surrender charges, MVAs and rates depend on your contract and current market conditions.
Same person, same rates. The only difference is timing. Inside the surrender period, the costs of leaving can outweigh a much higher new rate. Once it ends, the same move can be worth tens of thousands of dollars. The most useful thing to know about your annuity is the date its surrender period ends.
- If you plan to use an income rider later, the benefit base is the asset to protect. A higher cap on a new contract may never make up for walking away from years of roll-up.
- There can be a middle path. Some contracts allow part of the value, often the penalty-free amount, to move each year through a partial exchange, shifting money gradually without surrender charges. Partial exchanges have tax timing rules, so confirm them with your CPA first.
- Or leave the old contract alone and put any new money into a new contract at today's rates.
If you are already drawing income
Here the question changes from what rate am I earning to how much guaranteed income would I give up.
- Income from a rider. Your lifetime income is calculated from the benefit base, not the account value, and that base generally does not transfer. A new contract starts from your account value, less any surrender costs, and many new riders need a waiting period before income starts, or pay less if it starts right away.
- Annuitized contracts. Once a contract is annuitized, the payments are generally locked in and there is no account value to exchange. Today's higher rates matter for money you have not yet turned into income.
- Withdrawals and RMDs. If the annuity sits in an IRA, check that the new contract lets you take required minimum distributions without surrender charges, and how much it allows out penalty-free, especially in the first year.
- Your age and the new surrender period. A new seven- to ten-year schedule that starts at 75 runs into your mid-80s. Many contracts waive surrender charges at death or for nursing home care, but not for ordinary needs.
| Keep the rider | Switch to a new contract |
|---|
| Starting point | $300,000 benefit base | $180,000 account value, $171,000 after a 5% surrender charge |
| Payout rate | 5.5% of the benefit base | A hypothetical 7% of the amount moved |
| Guaranteed income | $16,500 a year | $11,970 a year |
Hypothetical illustration only, not a quote. Payout rates depend on age, contract terms and market conditions, and many riders apply a waiting period before income begins.
A higher payout rate on a smaller number is still less money. In this example the new contract pays a higher percentage and still produces about $4,500 a year less, roughly 27% less income, for the rest of your life. Anyone recommending a switch while you are drawing income should show you income before and after, in dollars.
Premium bonuses: how they change the math
You may be offered a contract with a premium bonus, pitched as covering your surrender charge. Understand what comes with it.
- A longer surrender schedule, often longer than the one you are leaving.
- Lower caps or participation rates than the same carrier's non-bonus version, which is how the bonus gets paid for.
- A vesting or recapture schedule, so part or all of the bonus can be taken back if you withdraw or surrender early.
Here is the first case from above again, now with a bonus. The new contract adds a 7% premium bonus but, as bonus contracts typically do, credits less: an assumed 4.25% a year instead of the non-bonus version’s 5.00%, with a new ten-year surrender schedule and the bonus vesting over those ten years.
| Wait two years, then switch | Switch now with a 7% bonus |
|---|
| Starting amount | $200,000 stays two more years at 2.25% | $186,000 after surrender costs, plus a $13,020 bonus: $199,020 |
| Account value in year 2 | $209,101 | $216,296 |
| What you could actually take out in year 2 | $209,101 | $187,351, after the unvested bonus and a 9% surrender charge |
| Value in year 10 | $308,938, moved in year 2 to a non-bonus contract at 5.00% | $301,757, crediting 4.25% |
| Surrender schedule | A new one from year 2, on whatever term you choose | A new ten-year schedule starting now |
Hypothetical illustration only, not a quote. Assumes the bonus contract credits an average 4.25% a year against 5.00% for the non-bonus version, a bonus vesting evenly over ten years, and a 9% surrender charge in year 2. Actual bonuses, vesting, crediting and charges vary by contract.
On paper the bonus wins. In practice it usually does not. The bonus is added to your account value immediately, so early statements look about $7,000 better. But until it vests and the new surrender schedule runs down, you cannot take it with you: what you could actually withdraw in year 2 is about $22,000 lower. Over the full term, the lower crediting rate costs more than the bonus paid. Judge a bonus by the surrender value, not the account value, and against the same carrier’s non-bonus version.
The same holds if you are drawing income. In the income example above, adding a 7% bonus to the $171,000 moved only lifts income to about $12,808 a year, still roughly 22% below the $16,500 the existing rider pays. Some riders credit a bonus to the income benefit base instead. That raises the income calculation but not the money you could withdraw, so compare income in dollars and withdrawable value separately.
A bonus is not free money. It is paid for somewhere else in the contract. A bonus that offsets a surrender charge while starting a longer schedule and lowering your caps can leave you worse off over the life of the contract. Always ask for the non-bonus version of the same product, side by side.
When a refinance usually makes sense
- Your surrender period has ended, or is about to, and any MVA no longer applies.
- Your current renewal rate or caps sit well below what a comparable new contract offers.
- You would not lose a rider you plan to use, and you are not yet drawing income from one.
- The new surrender period fits your age and when you will need the money.
- Any premium bonus has been judged on the value you could actually take out, against the same carrier’s non-bonus version.
- You have not replaced an annuity in the past five years.
When it usually does not
- A significant surrender charge still applies, especially with a negative MVA.
- You are already taking lifetime income from a rider, or the contract has been annuitized.
- Your contract has an income rider with a large benefit base you intend to use.
- The switch is pitched with a bonus that covers the surrender charge and a longer new schedule.
- It would be your second replacement within a few years.
- You may need the money during the new surrender period.
What Texas requires, and what you should get
Texas adopted a best-interest standard for annuity sales in 2021. For an exchange or replacement, the agent has to weigh the whole transaction: surrender charges, lost benefits, the start of a new surrender period, and whether you have had another exchange in the preceding 60 months. Texas also requires specific replacement disclosures.
What you should receive: a written comparison of the old and new contracts, both contracts' surrender schedules and guaranteed minimums, the current renewal rates on your existing contract, your guaranteed income before and after if you are drawing income, and a clear statement of anything you give up. Moving non-qualified money from one annuity to another can generally be done as a tax-free 1035 exchange, and IRA money by direct transfer; confirm the tax treatment with your CPA.
How I handle these
The first step is reading your current contract: which phase it is in, the surrender schedule, whether it has an MVA, the current renewal rates, and the value of any rider. Quite often the honest answer is to wait until a specific date, and I will tell you what that date is. If you are already drawing income, the answer is usually to leave it alone, and I will say so. I recommend switching only when a new contract clearly benefits you over its whole life, with the written comparison Texas requires. Because I am paid when you buy a new contract, that comparison should be in writing, so you can check my reasoning.
Frequently Asked Questions
Should I replace an annuity I bought in 2020 or 2021?It depends mainly on timing and on which phase the annuity is in. If you are still accumulating, the surrender period is over, and your renewal rate sits well below what new contracts pay, switching can be worth a lot. If you are still inside the surrender period, especially with a market value adjustment, or you are already drawing income, the costs of leaving usually outweigh a higher new rate.
Can I refinance an annuity that is already paying me income?Usually not in a way that helps. If your income comes from a rider, it is calculated from your benefit base, which generally does not transfer, so a new contract would start from the smaller account value. If the contract has been annuitized, the payments are generally locked in and there is nothing to exchange. Compare guaranteed income before and after, in dollars, rather than rates.
Should I switch an annuity I am taking withdrawals or RMDs from?Only after checking the new contract's terms. Confirm that it lets you take required minimum distributions without surrender charges, how much it allows out penalty-free, especially in the first year, and that the new surrender period fits your age and plans.
Can I exchange an annuity without paying taxes?Generally yes. Moving non-qualified money from one annuity to another can generally be done as a tax-free 1035 exchange, and annuities held in an IRA can move by direct transfer. The exchange has to be handled correctly to keep that treatment. Dev Gaymes is not a tax advisor, so confirm your situation with a CPA.
What is a market value adjustment, and why does it matter now?A market value adjustment changes what you receive on an early surrender depending on how interest rates have moved since you bought. When rates have risen, as they have since 2021, it usually reduces the amount you get back. That makes leaving a low-rate contract early more expensive at exactly the time new rates look most attractive.
Does a bonus annuity cover my surrender charge?It may offset it on paper, but the bonus is paid for elsewhere in the contract. Bonus annuities typically carry longer surrender schedules, lower caps or credited rates than non-bonus versions, and a vesting schedule, so much of the bonus cannot be taken out for years. In a hypothetical example, a 7% bonus made a switch look about $7,000 ahead in year 2 while the value that could actually be withdrawn was about $22,000 lower. Compare surrender values, not account values.
Will I lose my income rider if I exchange my annuity?Usually the benefit base you have built up does not transfer; only the contract value moves to the new annuity. If you plan to use the income rider, or are already using it, that can be the largest cost of switching, and it does not show up in a simple rate comparison.
How often can I replace an annuity?There is no fixed limit, but under Texas's best-interest standard an agent must consider whether you have had another exchange or replacement in the preceding 60 months. Frequent replacement can keep you inside surrender periods for years, so a second switch within a few years needs a very strong reason.
