What Happens When Your Annuity Matures?

Your MYGA is about to mature and you are not entirely sure what happens next. You are not alone — this is one of the most common questions from annuity owners, and the answer matters because the window for decision-making is shorter than most people expect.

What "Maturity" Means

At the end of your contract term — whether that is 3 years, 5 years, or 10 years — your annuity reaches its maturity date. At this point, the surrender charge period has ended. You have full access to your money without penalty.

What happens next depends on which carrier you are with and what you communicated before the maturity date.

The Maturity Window

Most carriers send you a notice 30 to 60 days before maturity with your options. You typically have a window of 10 to 30 days after the maturity date to make your election. This window varies by contract — read your notice carefully.

If you do nothing during that window, most contracts do one of two things: 1. Roll into a new term at whatever rate the carrier is currently offering 2. Move to a low-rate holding account while you decide

Neither is necessarily what you want. The key is to be proactive before the maturity date, not reactive after.

Your Options at Maturity

Option 1: Take the full withdrawal. You receive your principal plus all accumulated interest. For a non-qualified annuity, the growth portion is taxable as ordinary income in the year you receive it. For an IRA-held annuity, the full amount is taxable.

Option 2: Take a partial withdrawal. Take some of the proceeds — enough to cover a planned expense or to diversify — and roll the remainder into a new product.

Option 3: Exchange into a new annuity (1035 exchange). This is usually the cleanest option if you want to continue growing the money tax-deferred. A 1035 exchange allows you to move from one annuity to another without triggering taxes. No tax on the growth until you eventually withdraw. Works for both non-qualified annuities and IRA-held annuities (as a direct transfer).

Option 4: Renew with the same carrier. Some carriers offer renewal rates at maturity. These are sometimes competitive, sometimes not. Compare the renewal rate against current market rates before automatically renewing.

The 1035 Exchange — What You Need to Know

A 1035 exchange is a tax-free transfer from one life insurance or annuity contract to another. The rules:

• Must be a direct transfer — the funds go carrier-to-carrier, never to you personally
• New contract must be an annuity (or life insurance in some cases)
• The cost basis transfers along with the funds
• Process typically takes 2 to 4 weeks

If you are moving to a higher-rate MYGA at maturity, a 1035 exchange is the right mechanism. Requesting a check and then depositing it yourself is a distribution — taxable if non-qualified.

The Most Common Mistakes at Maturity

Waiting too long. Many people let the maturity date pass without making a decision. Your money may sit in a low-rate account for weeks while paperwork processes. Start your comparison 45 to 60 days before maturity.

Auto-renewing without comparing. Your carrier's renewal rate may be below current market rates. Always compare before renewing.

Taking a large cash distribution without considering taxes. A $200,000 annuity with $60,000 of growth, fully distributed in one year, adds $60,000 to your taxable income. That could push you into a higher bracket. A partial withdrawal or a spread-over-multiple-years approach may be more efficient.

Not asking about the 1035 exchange. If you want to stay in an annuity but switch carriers for a better rate, the 1035 is the only way to do it without a tax hit.

What to Do Right Now

If your MYGA matures within the next 90 days, reach out. We will compare current market rates to your carrier's renewal offer, run the numbers on a 1035 exchange to a higher-rate product, and make sure the timing and mechanics are handled correctly so you do not end up in a holding account at a low rate.

It is a straightforward process — the people who get the best outcome are simply the ones who plan it a few weeks in advance rather than scrambling after the fact.