Should You Surrender or Replace That Old Annuity?

Erin: Jordan, so good to see you. Let’s start with a question that I think a lot of people are asking these days. Should you surrender or replace that old annuity? Annuities can play an important role in retirement planning, but what made sense years ago may not fit your needs today. So let’s walk through how to evaluate your options. When should someone consider surrendering or replacing an annuity, and what’s the difference between the two?

Jordan: Yeah, it’s a great question because a lot of people are evaluating their current annuity and saying, “Hey, I can get better interest rates at a CD or somewhere else right now.” And sometimes the reason for that is because they got that annuity when interest rates were relatively low. Annuities are kind of based on that interest-rate environment.

So for a lot of people, they can review their current annuity and, I like to say, they can upgrade it, or they can get either better growth or get more income without them having to put any more money into that contract. So what we like to do is just periodically look through their accounts and make sure, based on interest rates, based on surrender charges, if it makes sense, we want to reach out to people and say, “Hey, we can get you a 35% increase in income. Do you want to take it?” He’s like, “Yeah, of course you would want to do that.”

So again, there’s no perfect time, but I think we want to constantly review this. And if you have an annuity issued, say, roughly about three years ago, there’s a 90% chance we can probably do some kind of comparison, explain the pros and cons, and see how we can help.

Erin: What are some of the most common mistakes people make during the surrender or exchange process?

Jordan: Yeah, some people don’t look at all the details in the fine print, right? You don’t want to just replace an annuity to replace an annuity. It has to benefit you. So a lot of these annuities, just based on their structure, they do have a surrender charge. Some people hate paying that surrender charge. Say it’s 5% or 7%, whatever it is at that time.

But a lot of times, we’re not going to recommend a replacement unless you’re going to be better from day one. So we can actually show people how, hey, even though you have, say, a 5% surrender charge, we can put you in an investment that not only gets you better growth than you currently have, but it’ll give you a 10% bonus. So day one, you’re net positive 5%, and you have better growth opportunities.

So a surrender charge is not fun. No one wants to pay that. But hey, if I can upgrade my policy and get better growth and be ahead day one, that’s a win-win for everyone.

Erin: If someone then decides to move forward, what can they do to ensure it goes smoothly?

Jordan: Well, we want to create a plan, right? And we want to make sure we look at the tax considerations. We want to look at the investment considerations. And then honestly, for our clients, we just handle the process so it’s a smooth transition, so they don’t have to do any of the legwork.

Some people, I’ll say, are a little bit misled and they’re being sold a product, and it can be a little bit complicated in how they go about that, and it could create some frustration. But for our clients, one, we have to educate clearly why we’re doing this, what the benefit is for you, and then we help with the paperwork to make it a very smooth transition.

Erin: So what’s your best advice then for investors who are thinking about making a change but aren’t sure where to start? Or if there is someone out there who’s saying, “Hey, you should really buy this new annuity. Interest rates are higher now,” what should they be doing?

Jordan: Everything goes back to a plan. We don’t sell products or investments. We create a plan, and products and investments fit inside of that plan. So the first thing they should do is get a plan because a lot of people, I’ll be frank, they are given an annuity.

To be blunt, there are probably a lot of times annuity salespeople are trying to push a product or push a special feature. Annuities have a place, but they shouldn’t be sold to be this glamorous, amazing thing. They’re really meant for conservative growth and for guaranteed income for most people.

So we need to make sure we have a plan and see: Do you want conservative growth? Do you want more guaranteed income? And if so, we’ll review your annuity, see if we can upgrade it, or we might use an annuity. But we need to have that plan and then fit inside of that the products and investments to accomplish your goals.

Erin: Right, it does all come back to that plan, but at least having the conversation now makes sense considering interest rates again, like you mentioned. Jordan, if somebody would like a second opinion or if they’d like to talk through an old annuity with you, what’s the best way to reach you?

Jordan: Yeah, before I give the number, I’ll say I am 95% confident. If you had an annuity in the last three years, we will show you some value, how we can upgrade it. Again, this is open to anyone that sees us on YouTube or wherever it is. Send us that statement. Quick comparison: “Hey, this is how we can help you.”

Take it or leave it, but I think it’s well worth your situation. If your annuity could be better, would you want it to be? We’d love to help. The first step would be to call our number, 847-499-3454, and see if we can have a time to review your plan, but also upgrade those annuities if you have them.

Erin: Great. Again, Jordan, thank you so much for your time today. And everybody watching, please stand by for a QR code at the end.

Jordan: Thanks, Erin.