What Happens When an Annuity Matures?
When an annuity matures, the surrender period ends and you can reach all of your money without a penalty. For a fixed annuity or multi-year guaranteed annuity (MYGA), you then have four options:
- Withdraw the money as cash.
- Renew into a new guarantee period with your current carrier.
- Transfer to a different annuity, tax-free, through a 1035 exchange.
- Annuitize into a stream of income payments.
You get a short window to decide, most commonly 30 days. Your contract sets the exact length. If you do nothing, most contracts renew on their own.
What does it mean when an annuity matures?
Three different events get called “maturity,” and they are not the same thing. Knowing which one applies to you is the difference between making a decision and having one made for you.
- The end of the guarantee period. This is what most people mean. You bought a 5-year MYGA, the five years are up, and the surrender charge schedule has expired. Nothing happens to your money on that date except that you gain the right to move it.
- Annuitization. This converts your account value into income payments, usually for life. It is a choice you make, not something that happens to you. A maturing MYGA does not force you into payments you did not ask for.
- The contract maturity date. Your contract also lists a maturity date, usually tied to an advanced age such as 95 or 100, when the contract itself ends. For most owners that date is decades away and has nothing to do with the surrender period ending.
If you own a MYGA and your term just ended, you are in the first group. Your money is available, nothing has been converted to income, and you have a short window to decide what happens next.
What are your options when an annuity matures?
Withdraw your money
You can take the full account value in cash. The surrender charge is gone, so the carrier will not penalize you. Taxes are the catch:
- Non-qualified annuity: the growth comes out first and is taxed as ordinary income, not capital gains (IRS Publication 575).
- Annuity inside an IRA: the entire withdrawal is usually taxable.
- Under age 59½: the taxable part can owe an extra 10% federal tax unless an exception applies (IRS early distribution rules).
Five years of growth taken in one year can push you into a higher tax bracket. Cash makes sense when you need the money or the tax bill is small. It is the most expensive option if you simply want to keep the money working.
Renew into a new guarantee period
Your carrier will offer a renewal rate for a new term. Accept it and the contract continues with a fresh guarantee and, usually, a fresh surrender schedule.
This is the easiest option and the one that deserves the most scrutiny. Carriers set renewal rates for money they already hold, and those rates are often below the new money rate the same carrier pays new buyers.
Comparing your renewal offer against the open market takes about thirty minutes, and most people skip it because renewal happens by default. Check the new surrender schedule too, and see where annuity rates are heading before you commit to another multi-year term.
Transfer to a different annuity with a 1035 exchange
Section 1035 of the tax code lets you move a non-qualified annuity to another annuity without paying tax (26 U.S. Code § 1035). Your cost basis carries over and the growth stays tax-deferred. For an annuity inside an IRA, the equivalent is a direct transfer between custodians.
Many owners do not know this option exists, and it is often the right one. You keep the tax deferral, you leave the old contract behind, and you can shop every carrier instead of accepting one renewal offer.
The money has to move directly from carrier to carrier. If you take the check yourself first, you have created a taxable event. Our guide to annuity 1035 exchange rules walks through the paperwork.
Annuitize for guaranteed income
Annuitization converts the account value into payments for a set number of years or for the rest of your life. In a non-qualified annuity, part of each payment is a tax-free return of your principal, which spreads the tax over many years instead of one.
This fits someone who now needs income rather than growth. It is a one-way door: once you annuitize, the lump sum is no longer yours to access. Treat it as a deliberate retirement income decision, not a default.
Comparing your four options
| Option | Access to your money | Tax impact | Best if |
|---|---|---|---|
| Withdraw as cash | Immediate and full | All gain taxed as ordinary income this year; extra 10% if under 59½ | You need the money now |
| Renew with your carrier | Locked again for the new term | None | The renewal rate is genuinely competitive |
| 1035 exchange | Locked into the new contract’s term | None; deferral and cost basis carry over | You want to keep deferring but can do better elsewhere |
| Annuitize | Converted to payments; lump sum no longer available | Spread across payments; part of each non-qualified payment is return of principal | You are ready to turn the balance into income |
What happens if you do nothing?
Something happens whether you act or not, and the default is rarely the best outcome available to you.
Most fixed annuity contracts include a window after maturity, most commonly 30 days, when you can withdraw or transfer without a penalty. The carrier sends a letter before the term ends explaining your choices. That letter often arrives with ordinary mail and gets set aside.
If the window closes with no instruction from you, one of two things typically happens:
- Automatic renewal. The contract renews into a new guarantee period at the carrier’s renewal rate, and a new surrender schedule starts. Your money is locked up again.
- A holding account. The balance moves to an account paying a low fixed rate while it waits for your instructions.
Automatic renewal is not a penalty, and it is not hidden. It does mean accepting a rate you never compared and a surrender period you never chose.
If the window has already closed on you, call your carrier anyway. Some contracts allow a transfer shortly after renewal, and the answer depends on the contract.
Already own an annuity? Get a free annuity audit
Send us your most recent annuity statement and we will send back a written report on what the contract does, what it costs you, and whether a move would leave you better off after any surrender charge. No cost, and no obligation to change anything.
Does an annuity keep growing after it matures?
Yes, but usually at a very different rate, and that difference is the point.
During the guarantee period, the carrier was contractually bound to credit a fixed rate. Once the term ends, that obligation ends with it.
- If the contract renews: the money grows at the new renewal rate the carrier sets.
- If it moves to a holding account: it earns whatever that account pays, often close to the contract’s minimum guaranteed rate.
Money sitting in a matured annuity is not losing value in dollar terms. It is simply earning less than the same dollars could earn in a new contract. Left alone for a year or two, it quietly underperforms without anything going wrong on the statement.
How maturity works for each type of annuity
- Fixed annuities and MYGAs. The cleanest case, and the one this guide is built around. The guarantee period ends, the surrender charge expires, and all four options are open to you.
- Fixed index annuities. When the surrender schedule ends, you have the same four options. The contract itself can continue for years, with caps and participation rates that reset each year. There is often no single maturity moment, just the point where you can leave without a charge.
- Variable annuities. The account value floats with the subaccounts, so the amount available depends on market performance. If the contract carries a living benefit rider, moving the money may give up a guaranteed benefit base worth more than the account value. Compare those two numbers before you do anything.
- Immediate annuities (SPIAs) and deferred income annuities. These do not mature in the same sense. You traded a lump sum for guaranteed income payments, and the payments continue for the term or for life.
Whether the annuity is qualified or non-qualified matters for every type above:
- Non-qualified annuity: bought with after-tax money, so only the gain is taxable, and 1035 exchanges apply.
- Qualified annuity (inside an IRA): a full withdrawal is taxable, you move it by direct transfer or rollover, and required minimum distributions apply after RMD age (IRS Publication 590-B).
What to do before your annuity matures
Start about 60 days before the maturity date. That gives you time to compare offers without rushing the decision in the final week.
- Find your maturity date. It is on your annual statement or original contract, and your carrier will confirm it by phone.
- Open the renewal letter. It states your renewal rate and your deadline.
- Ask the carrier two questions: what is the renewal rate, and what surrender schedule comes with it?
- Compare against the market. Check your renewal rate against today’s fixed annuity rates for the same term.
- Confirm qualified or non-qualified. That decides whether a 1035 exchange or a direct transfer applies.
- Check riders. If you own a variable or index annuity with a rider, ask what guaranteed benefit you would give up by leaving.
- Decide before the window closes. Doing nothing is itself a decision.
Knowing what happens when an annuity matures, before the renewal letter arrives, keeps the decision in your hands instead of the carrier’s.
Lock in today's MYGA rate before your renewal window closes
Your rate is set by your application date, not the day rates change. Request a quote and we will confirm current rates for your state and premium, in writing, so you can decide before the market moves.
Frequently Asked Questions
How long do I have to decide when my annuity matures?
Most fixed annuity contracts give you 30 days after the maturity date to withdraw or transfer without a surrender charge. Your contract sets the exact window, and your carrier will confirm it. Miss it and the contract usually renews automatically.
Do I pay taxes when my annuity matures?
Not from maturity itself. Maturity is not a taxable event; you owe tax when you take money out. Renewing or doing a 1035 exchange keeps the deferral intact, while a cash withdrawal triggers tax on the gain as ordinary income.
Can I move my annuity to a new company without paying taxes?
Yes. A 1035 exchange moves a non-qualified annuity to another annuity with no tax due and your cost basis intact. For an annuity in an IRA, a direct transfer does the same. The money has to move directly between carriers, or the tax protection is lost.
Will my annuity automatically renew?
Usually, if you give no instruction before the window closes. It renews into a new guarantee period at the carrier’s renewal rate, typically with a new surrender schedule. Some contracts instead move the balance to a low-rate holding account.
Is the maturity date the same as the end of the surrender period?
Not always. The end of the guarantee or surrender period is when your money becomes penalty-free. The contract maturity date is a separate, much later date, often tied to an advanced age, when the contract itself ends.
