What Happens When an Annuity Matures

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What Is An Annuity Maturity Date

The maturity date on an annuity is an essential term that every annuity owner should understand, regardless of their Social Security status. Essentially, it’s the point in time when your annuity contract matures and your income phase begins. This is usually set at a specific age, often 85 or 90, but can be as early as 70. Understanding the maturity date is critical because it helps you plan your future financial strategy effectively, taking into account factors such as Social Security benefits and other sources of income.

What Happens When An Annuity Matures

How Can I Know the Maturity Date of An Annuity?

Identifying your annuity’s maturity date should be straightforward. This date is typically stipulated in your annuity contract. If unsure, contact your insurance company or financial advisor, who can provide this information.

Annuity Matures

Related Article: Why Would Someone Buy An Annuity That Matures After Death?

The Grace Period of a Mature Annuity

After your annuity matures, there’s usually a grace period during which you can decide how to proceed. This grace period is a sort of safety net, giving you time to weigh your options and make an informed decision about the next steps. It’s crucial to know the length of this grace period as it varies by company and the type of annuity you have.

What Happens When An Annuity Matures

Options When Your 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.

What to Do When My Variable Annuity Matures?

You could annuitize the contract for a variable annuity, converting your accumulated funds into regular income payments. Alternatively, you might opt for a systematic withdrawal plan to maintain control over the funds while receiving a steady income.

What to Do When a Fixed Index Annuity Matures?

When a fixed index annuity matures, you could take a lump sum withdrawal, convert it into an income stream through annuitization, or roll it over into another annuity or financial product. The right choice depends on your financial goals and circumstances.

Figuring Out the Value of Annuity at Maturity

The value of your annuity at maturity depends on various factors, including the initial investment, the interest rate, and the annuity term. You can calculate this using an annuity calculator or by asking your insurance company or financial advisor.

Annuities Matures

Tax Considerations at Annuity Maturity

A common question is whether there are tax penalties when annuities mature. The short answer is no; however, there may be taxes on withdrawals, particularly if you withdraw before age 59 1/2.

What Are Options When Annuity Contract Matures Before Age 59 1/2?

You can still annuitize or withdraw systematically if your annuity contract matures before 59 1/2. However, be aware that if you withdraw before this age, you may face a 10% early withdrawal penalty on top of regular income taxes.

Next Steps

Understanding what is an annuity maturity date can be complex, but with the correct information, you can make informed decisions that align with your financial goals. From knowing your maturity date and understanding your options to considering tax implications and potential penalties, being well-informed is your best weapon.

Annuity Maturity Date

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Frequently Asked Questions

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 refers to the point at which 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 72. For Roth IRAs, there is no RMD requirement. However, suppose you own an annuity purchased with pre-tax dollars, generally known as a qualified annuity. In that case, you must begin making withdrawals no later than April 1 of the year after you turn 70½.

How long does it take for an annuity to mature?

The time it takes for an annuity to mature depends on the terms of the policy. Generally, annuities have a maturity date of 10 to 30 years. However, some annuities may have longer or shorter maturity periods. It’s important to review the specific terms and conditions of your annuity contract to determine the maturity date.

My annuity has matured what should I do?

If your annuity has matured, it’s important to evaluate your options before making a decision. Consider factors such as your financial goals, current market conditions, and potential tax implications. Consulting a financial advisor can help you make an informed choice based on your specific circumstances.

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 happens with annuities after 90 years of age?

Annuities after 90 years of age are generally limited due to the decreased life expectancy. Insurance companies are hesitant to offer annuity contracts to individuals at such an advanced age. However, some companies may still provide annuities to those aged 90 or older, but typically with reduced payout rates and limited options. It’s advisable to consult with a financial advisor to explore alternatives suitable for the elderly.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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