What happens when your FIA's surrender period ends?
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Short answer: When the surrender period ends, you can withdraw your fixed indexed annuity's value without a surrender charge, leave it in place, turn on income, or move it to another annuity through a 1035 exchange, which isn't taxed at the time of the exchange. Taxes still apply to gains you withdraw (to the full amount if it's in a traditional IRA).
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The contract doesn't end, the charges do
A fixed indexed annuity (FIA) doesn't stop when its surrender period ends. The SEC's Investor Bulletin says surrender periods typically last six to ten years, or even longer. After that, the surrender charge is gone. Many contracts apply a market value adjustment only during the surrender period. Check yours. If you do nothing, the contract generally keeps going and keeps crediting interest under renewal terms.
Option 1: Keep it
If the renewal caps and participation rates are still competitive, staying put can be the easy choice. Your money keeps its 0% floor on index crediting and stays tax-deferred. Any rider fees still come out of your account value. Now you can also move it later without a surrender charge. See can my FIA cap change?
Option 2: Take some or all of it out
You can withdraw without a surrender charge. Taxes still apply to gains. For a non-qualified FIA, IRS Publication 575 says withdrawals come from earnings first. Before age 59½, a 10% federal penalty may also apply.
Example: a non-qualified FIA with $100,000 paid in is worth $140,000. You withdraw $40,000. All $40,000 is taxable as ordinary income because earnings come out first.
Option 3: Turn on income
You can start an income rider if you have one, or annuitize, which turns the account into payments for life or a set period. FINRA's annuities page notes that the decision to annuitize is generally irrevocable, so be sure before you choose it.
Option 4: Exchange it for another annuity
Publication 575 says no gain or loss is recognized when you exchange one annuity contract for another if the annuitant stays the same. This is often called a 1035 exchange. It can make sense if another FIA has better terms for you. FINRA cautions that a new contract usually restarts the clock on surrender charges, so only switch when it's better for you, not just for the person recommending it.
How it compares with a MYGA and a CD
Some people move money to a MYGA or a CD at this point because they want a fixed rate. A MYGA keeps tax deferral. CD interest is generally taxable each year, and a CD is FDIC insured within limits. For fixed-rate comparisons, see this week's 5-year MYGA rates.
Before the date arrives
- Ask the insurer for the exact date your surrender period ends.
- Request the current renewal caps and participation rates.
- Decide whether you'll want income soon, and from which source.
- If you're thinking about an exchange, compare both contracts side by side.
Questions worth asking
- What are my renewal terms if I stay?
- Is there anything else, such as an MVA or a bonus vesting schedule, still in effect?
- What would a new contract's surrender period and terms be?
- What are the tax effects of each choice for me?
Plain-English FAQ
Does my FIA end when the surrender period ends?
No. The contract generally continues and keeps crediting interest until you withdraw it, annuitize it or reach the contract's maturity date, if it has one. Only the surrender charges end.
Do I have to do anything when the surrender period ends?
No. If you do nothing, the contract usually just keeps going under renewal terms. It's still a good time to review your options.
Will I owe taxes if I take the money out?
On any gain, yes, as ordinary income. In a traditional IRA, the whole withdrawal is generally taxable. For a non-qualified FIA, earnings come out first. Withdrawals before 59½ may also face a 10% federal penalty.
Should I exchange into a new bonus annuity?
Only if it's clearly better for you after comparing caps, fees and the new surrender period. An exchange usually starts a new surrender period.
Ready for your number?
Every contract has its own caps, fees and surrender schedule, so the general rules on this page only go so far. You can get a free one-minute income quote at quote.garycosby.com, and if you choose, talk with one of our licensed agents about how a specific contract works. It's your money and your decision.
More guides
- What is a fixed indexed annuity?
- Can the insurance company lower my FIA cap or participation rate?
- How are fixed indexed annuities taxed?
- This week's 5-year MYGA rates (fixed-rate comparison)
Sources
- SEC Office of Investor Education and Advocacy, "Updated Investor Bulletin: Indexed Annuities" (July 31, 2020; checked October 23, 2026). https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-investor-bulletin-indexed-annuities
- IRS, Publication 575 (2025), Pension and Annuity Income (checked October 23, 2026). https://www.irs.gov/publications/p575
- FINRA, "Annuities" investor page (page date not shown; checked October 23, 2026). https://www.finra.org/investors/investing/investment-products/annuities
- NAIC, "Buyer's Guide for Deferred Annuities" (2022 edition; checked October 23, 2026). https://content.naic.org/sites/default/files/publication-anb-lp-consumer-annuities-fixed.pdf
All figures on this page come from the dated sources above. Dollar amounts and percentages labeled Example are illustrations, not rates, quotes or predictions.