What to do next, how taxes and Medicare interact, and how to avoid costly mistakes
When an annuity matures, the surrender period ends. At this point, you can move money without surrender charges, start income, or reposition your strategy. The right choice depends on your age, tax situation, whether the annuity is qualified (IRA/401(k) money) or non-qualified (after-tax money), and whether your goal is income, growth, or liquidity.
What Is An Annuity Maturity Date?
The maturity date on an annuity is an essential term that every annuity owner should understand. It’s the point in time when your annuity contract matures, and your income phase begins. Typically, this date is set at a specific age, often 85 or 90, but it can be as early as 70. Understanding the maturity date is critical for effective financial planning, especially when considering your future financial strategy and sources of income, such as Social Security benefits.
How to Determine the Maturity Date of Your Annuity
Identifying your annuity’s maturity date should be straightforward. This date is typically stipulated in your annuity contract. If you are unsure, contact your insurance company or financial advisor to provide this information. Knowing this date helps you plan your financial future with confidence.
The Grace Period of a Mature Annuity
After your annuity matures, there is usually a grace period during which you can decide how to proceed. This grace period acts as a safety net, giving you time to weigh your options and make an informed decision about the next steps. It’s crucial to understand the length of this grace period, as it varies by company and the type of annuity you have.
Compare Your Options When an Annuity Matures
When your annuity matures, you generally have a few options: withdrawing the lump sum, converting it into a stream of income, or reinvesting it into another financial product. The right choice depends on your financial goals and circumstances.
Renew a MYGA
- You can keep the contract and renew it into a new multi-year guaranteed term.
- Pros: Simple, principal protection, guaranteed fixed rate, tax deferral.
- Cons: Miss out on potentially better rates, limited liquidity.
- Best For: Savers who prefer CD-like predictability.
- Not For: Those who need flexible access or higher returns.
Our Expert Advice: Don’t automatically renew with your current insurance company without checking the marketplace first. Many “renewal rates” are lower than what new customers get. You can view current fixed annuity rates to see the top-rated 3, 5, and 10-year terms available to you right now.
Transfer to a Better Annuity
- You can move into a new annuity via a 1035 exchange (non-qualified) or direct transfer/rollover (qualified).
- Pros: Access to higher rates, new features, and tax deferral preserved.
- Cons: New surrender schedule requires paperwork.
- Best For: Shoppers comparing newer MYGAs, FIAs, or income riders.
- Not For: Anyone needing near-term liquidity.
Retirement Strategy: A 1035 exchange or a direct transfer requires careful paperwork to avoid unintended taxes. Working with an independent annuity broker ensures your funds move safely while giving you access to institutional-level rates that your current bank or agent may not offer.
Partial Cash-Out
- You can withdraw only what you need and keep the rest tax-deferred.
Risk Warning: Taking a lump sum gives you liquidity now, but it transfers the longevity risk back to you. Read our guide on can you outlive an annuity to understand why keeping a portion of your matured funds in a guaranteed contract is often safer than self-managing the withdrawal rate.
If you do choose to liquidate your funds at maturity, you are likely wondering exactly how long does it take to cash out an annuity. Insurance carriers typically process and distribute these funds within 7 to 10 business days.
Partial Annuitization
- Convert only part of the balance into guaranteed payments while the rest stays invested.
- Pros: Predictable income, potential tax efficiency using the exclusion ratio (each payment is partly taxable earnings, partly tax-free return of principal).
- Cons: Annuitization is permanent and limits flexibility.
- Best For: Those needing pension-like income on just a portion.
- Not For: Those who want full control and legacy flexibility.
Expert Note: If you need a pension-like paycheck but want to keep control of some of your capital, you should compare multiple “payout-only” options. Request a personalized annuity quote to receive a side-by-side comparison of the highest-paying immediate and deferred income annuities in the market.
Turn on a GLWB Rider
- If available, you can activate your Guaranteed Lifetime Withdrawal Benefit (GLWB).
- Pros: Contractually guaranteed income for life, the account remains in your name, beneficiaries inherit the remaining value, and you can stop/restart payments.
- Cons: Rider fees may apply, and payouts depend on contract terms.
- Best For: People who want a guaranteed income payout without giving up control.
- Not For: Those who only want the absolute highest payout and are comfortable with irreversible annuitization.
Strategic Insight: This is the only strategy where your account balance can hit zero, yet your income continues unchanged. Read our breakdown of do annuities run out of money to see how the “Benefit Base” protects your paycheck even after the cash value is depleted.
RMD Rules at Maturity
- RMD Start Age:
• Born 1951–1959 → First RMD at age 73.
• Born 1960 or later → First RMD at age 75. - First-Year RMD: You may delay until April 1 of the following year, but that forces two RMDs in the same year—potentially increasing taxes and Medicare premiums.
- Transfers: With IRA annuities, you can transfer first and still take that year’s RMD from the new account before year-end.
- Non-Qualified Annuities: These have no RMDs.
Tax Treatment at Payout
- Non-Qualified Annuities (before annuitization): Withdrawals and GLWB income use LIFO—earnings are taxed first as ordinary income.
- Non-Qualified Annuities (after annuitization): Payments use the exclusion ratio, blending taxable and tax-free portions until the investment in the contract is fully recovered.
- Qualified Annuities (IRA/401(k)): All distributions are generally taxable as ordinary income.
- Roth IRA Annuities: Qualified withdrawals are tax-free.
Medicare and IRMAA Timing
Medicare premiums (IRMAA) are based on income from the two years preceding the year in question. Large withdrawals, annuitization, or Roth conversions can increase premiums.
Tips:
- Avoid taking two RMDs in one year unless you’ve modeled the tax and IRMAA impact.
- Spread withdrawals over multiple years when possible.
- Use partial annuitization (exclusion ratio) instead of full LIFO withdrawals for tax efficiency.
- Always consider IRMAA thresholds before triggering large taxable distributions.
GLWB vs. Annuitization
- Control: GLWB keeps the account in your name; annuitization gives the insurer permanent control.
- Legacy: GLWB preserves death benefit value; annuitization may leave nothing unless you add a refund or period-certain option.
- Taxes: GLWB is LIFO; annuitization uses the exclusion ratio.
- Flexibility: GLWB is revocable within contract rules; annuitization is irreversible.
- Payouts: Annuitization may pay more initially; GLWB balances payout with control and protection.
How We Can Help
At The Annuity Expert, we understand that managing your annuity can be a complex and overwhelming process. With 18 years of experience as an insurance agency, annuity broker, and retirement planner, we have the expertise to guide you through this process.
We believe in finding the best solutions at the lowest costs. Our mission is to help you navigate your annuity options with clarity and confidence, ensuring you make informed decisions that align with your financial goals.
We recognize the anxiety and confusion that can come with managing annuities, especially as they mature. We are here to provide personalized guidance and support, helping you understand your options and make the best choices for your future.
Next Step
Before renewing, transferring, or starting income, compare every option side by side. Contact The Annuity Expert for free quotes to help you choose the path that best fits your tax situation, RMD timing, and Medicare considerations.
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Questions From Our Readers
Do annuities automatically renew?
The answer to this question depends on the annuity you are considering. Fixed annuities typically have a set term, which means they do not automatically renew after the end of the initial term. Variable and indexed annuities often feature an automatic renewal clause that allows them to continue in force after the initial term ends. Generally, the annuity holder can opt out of an automatic renewal clause.
Do all annuities pay for life?
No, not all annuities pay for life. Some annuities have a fixed term and will only pay out benefits until the end of that term. Other annuities may be structured as variable, offering payments for life or a specified period.
What is the annuity maturity date?
The annuity maturity date is when an annuity contract ends, and the payments made to the annuitant cease. It marks the completion of the predetermined period or the age at which the annuitant can start receiving payments. The annuity maturity date is determined upfront when the contract is set up.
What happens when an annuity matures?
When an annuity matures, the contract term comes to an end, and the annuity holder receives a lump sum or a series of payments depending on the chosen payout option. The accumulated funds can be withdrawn, reinvested, or used to purchase another annuity. It’s essential to review the terms and options provided by the specific annuity contract.
At what age do I have to withdraw from my annuity?
The age at which you must begin withdrawing funds from your annuity depends on your purchase type. For traditional IRAs, you must begin taking mandatory minimum distributions (RMDs) at age 73.
How long does it take for an annuity to mature?
Look separately at the interest-guarantee period, surrender-charge period, and contractual maturity or annuitization date. A five-year MYGA rate period, for example, does not necessarily mean the entire contract must pay out after five years. Request the insurer’s renewal notice and withdrawal options before the relevant deadline so you know whether to renew, transfer, or start income.
What are the fixed annuity maturity options?
Fixed annuity maturity options refer to the different choices available to annuity holders upon the expiration of their contract. These options may include taking a lump sum payment, converting to an immediate annuity, or continuing the annuity with a new maturity date. The specific options vary depending on the terms of the annuity contract.
What should I do with my $300k annuity that’s expiring at age 89, with $200k in taxable gains? I don’t want to annuitize, and my health is poor. What are the best options?
At age 89, you’re no longer eligible to open a new Fixed Indexed Annuity (FIA), since most carriers cap new policy issuance at age 85. In this case, the better option is to 1035 exchange the annuity into a Multi-Year Guaranteed Annuity (MYGA). Many MYGAs accept new contracts up to age 90.
A MYGA offers a guaranteed fixed interest rate for a set number of years, and you can take systematic penalty-free withdrawals, typically up to 10% annually. This gives you access to your money gradually, avoids a large upfront tax bill, and allows the balance to grow at a guaranteed rate. At death, the remaining value passes to your beneficiaries, and they only owe income tax on the gains.
Annuitization would lock you into an irrevocable income stream and may not be optimal given your age and declining health. Instead, the MYGA approach gives more control, avoids unnecessary taxation, and still provides income and preservation of wealth.
What does account maturity mean?
It’s when the term ends, and funds become accessible. For example, a 12-month CD matures; you can withdraw or renew without penalty.
What is the annuity commencement date?
The day income payments begin. For example, funding in January typically results in payments starting that same year or later.