The Questions
1. What problem does this solve for me? Should be able to clearly articulate specific purpose.
2. What is the total annual cost? All fees combined, in writing.
3. What is the surrender schedule? Exact percentages, year by year. Free withdrawal provisions.
4. How does this product generate returns? Understand the mechanics, not just illustrations.
5. What happens if I need my money? Beyond surrender charges — tax consequences, benefit impacts.
6. What am I giving up? Liquidity, upside, step-up basis, flexibility. Good advisors explain tradeoffs.
7. How does this fit my overall plan? Percentage of assets, interaction with other income, liquidity outside annuity.
8. Who is the insurance company? AM Best rating A- or better. Financial strength matters.
9. What happens when I die? Death benefit details, taxation to heirs, rider implications.
10. How is this person compensated? Commission, ongoing fee, fiduciary vs. suitability standard.
The Bottom Line
If you can confidently answer all 10, you're ready for an informed decision. If you can't — or if the salesperson can't — slow down. Take your time. Ask hard questions. Get it in writing.
Important Rules
• Direct transfer only — if you receive check, it's not a 1035
• Same owner required
• Surrender charges still apply
• New surrender period begins
• Partial exchanges possible but more complex
When Exchange Makes Sense
• Current annuity has high fees and you're past surrender
• Better rates availables
• Needs have changed (accumulation → income or vice versa)
• Want to consolidate multiple contract
When Exchange Doesn't Make Sense
• Trading into worse product (commission-driven)
• Surrender charges make math unfavorable
• Resetting timeline unnecessarily
• Losing valuable guarantees that no longer exist in market