If you own an annuity, there is a good chance nobody has reviewed it in years.

That’s not necessarily anyone’s fault. Many annuities are purchased for long-term purposes such as income guarantees, principal protection, or tax-deferred growth. Once the contract is in place, it often gets filed away and forgotten.

The problem is that life changes.

Retirement goals change. Income needs change. Tax laws change. Interest rates change. And the annuity marketplace changes as well.

What made sense when you purchased your annuity may still be the right solution today—but it may not.

That’s why we encourage retirees and pre-retirees to periodically conduct what we call an Annuity Audit.

When Retirement Goals Change

A common situation we encounter during retirement planning involves annuities that have been owned for many years.

In one such review, the annuity had been held for decades inside a Roth IRA and, over time, had become the primary investment within that account.

Like many investors, the account owner understood that the annuity was there but wasn’t entirely sure how the fees were structured, which features were still providing value, or whether the contract remained aligned with current retirement goals.

The review began with a simple question:

“Would a different approach better support my objectives today?”

As we evaluated the contract, it became clear that it had originally been purchased under a very different set of circumstances. Since then, the owner’s goals had evolved, the financial landscape had changed, and factors such as cost, flexibility, and long-term planning had become much more important.

One aspect that stood out was that the annuity was held inside a Roth IRA—an account that already offers tax-free growth and qualified tax-free withdrawals. That doesn’t automatically make an annuity the wrong choice. In some situations, an annuity inside a Roth IRA can still be entirely appropriate.

It does, however, raise an important question:

Are you receiving enough value from the annuity’s features to justify its costs within an account that already provides significant tax advantages?

That’s exactly the purpose of a Retirement Contract Audit.

Rather than assuming an annuity should be replaced—or that it should simply remain untouched—we believe it’s worth understanding exactly what you own, what you’re paying for, and whether the contract continues to support your current retirement objectives.

Sometimes the review confirms that the existing contract remains an excellent fit. Other times, it identifies opportunities that deserve further consideration. Either way, the goal is the same: helping investors make informed decisions based on their current circumstances rather than assumptions made years ago.

Has Your Surrender Period Expired?

One of the first things we look at is whether the contract remains subject to surrender charges.

Many annuities impose penalties for withdrawals or exchanges during the first several years of ownership. Once those charges expire, however, additional planning opportunities may become available.

This does not mean you should automatically replace the annuity.

In fact, many investors are surprised to learn that after reviewing their options, keeping their existing contract remains the best decision.

However, once surrender charges are no longer a factor, it becomes much easier to evaluate the contract on its own merits.

What Are You Paying For?

Many annuity owners know they have an income rider or additional benefit attached to their contract.

Far fewer know exactly what those benefits cost.

Some riders provide tremendous value. Others may be solving problems that no longer exist.

For example:

• Are you still planning to use the guaranteed income feature?
• Do you understand what the rider actually guarantees?
• Are you paying annual fees for benefits you may never use?
• Does the contract’s growth potential justify its costs?

These aren’t trick questions. They’re simply questions that deserve answers.

The Marketplace Has Changed

The annuity industry today looks very different than it did a decade ago.

Higher interest rates and increased competition have led to new products, different income structures, and in some cases more attractive guarantees than were available when older contracts were issued.

That doesn’t mean newer is automatically better.

But it does mean that assumptions made years ago may deserve another look.

We’ve seen investors discover that their current contract remains highly competitive. We’ve also seen situations where a review uncovered opportunities to improve income, increase flexibility, or better align the annuity with the rest of the retirement plan.

Beware of Unnecessary Exchanges

An annuity, or retirement contract, review should never begin with the assumption that a replacement is needed.

Unfortunately, that’s sometimes how the industry operates.

At Firm Foundations Financial Group, our goal is not to find reasons to replace contracts. Our goal is to help clients understand what they own and determine whether it continues to support their objectives.

Sometimes the answer is “keep it exactly as it is.”

Sometimes it isn’t.

Either way, the review should begin with education, not sales.

The Value of a Second Opinion

Many people seek second opinions on investments, tax strategies, Medicare decisions, and estate plans.

Annuities should be no different.

A contract that has been sitting untouched for years may still be serving you well. Or it may contain features, costs, or opportunities that deserve closer attention.

You won’t know until someone takes a careful look.

If your annuity is out of its surrender period—or if it has simply been years since anyone reviewed it—an Annuity Audit can help you understand exactly what you own, what you’re paying for, and whether your contract still aligns with your retirement goals.

Because the best financial decisions are rarely based on assumptions. They’re based on understanding.

Disclosure

The guarantees associated with annuities are subject to the financial strength of the issuing insurer and the specific terms and restrictions of the applicable policy or contract.