How 1035 Exchanges Work in Annuity Planning
As retirement approaches and markets evolve, your financial strategy needs the flexibility to adjust. A 1035 exchange is a powerful IRS-sanctioned tool that allows you to transfer funds from one annuity to another without triggering a taxable event. Whether you’re replacing an older annuity with better rates, moving to an option with an income rider, or simplifying your portfolio, a 1035 exchange helps you realign your strategy without giving up tax deferral.
This is especially useful for people holding older contracts with lower interest rates, outdated features, or unnecessary fees. Newer annuities often offer better rates, bonuses, income guarantees, and more consumer-friendly terms. A 1035 exchange allows you to take advantage of these improvements without paying taxes on gains—so long as the exchange is done directly between insurers.
But exchanges must be done carefully. Surrender charges, new contract terms, and lost benefits need to be reviewed closely before moving forward. That’s why it’s crucial to work with a trusted advisor who understands how to compare old and new contracts side by side.
At Diversified Insurance Brokers, we guide clients through 1035 exchanges by analyzing both the old and new annuity contracts—making sure you’re improving your position, not just starting over.
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