The Question

How can I increase my fixed annuity from only earning 2 percent interest to a better return?

Hello VJR,

First you will want to explore your options in your current fixed annuity.  You will want to know if there is a maturity on the term for the interest you are currently earning?  If so, and the maturity is not too far off, you may want to wait until maturity.  If so, and the maturity is too far out to wait, is there a market value adjustment if you were to cash out of the term?  What is it and would it negate the increase in interest?  Is there a surrender period or charge on the annuity you are in?  If so, what is the charge and how long until you are free of the surrender period?

Next, find out if you have a taxable gain?  If you do, annuities are last-in-first-out on taxation, so the gain comes out first.  If the taxable gain is too high to stomach, you can compare your current annuity to what is available on the market that you can do a 1035 tax-free exchange to.  When comparing products, be mindful of the length of surrender periods as you do not want to commit to anything longer than you are comfortable with.

If there is not a market value adjustment, a surrender charge for cashing out of the annuity and the taxable gain is not too high, you will want to assess what you can do in your current annuity vs. other annuities on the market, vs. CDs, T-bills, treasuries bonds, and corporate bonds (note default risk).

Paul Culbreth, CFP®


Culbreth Wealth Management

2098 Teron Trace

Ste. 700

Dacula, GA 30019

Office:  (770) 979-1301 Answered question October 3, 2023

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