# Why You Shouldn't 'Set and Forget' Your Annuity
Annuities demand active management, not autopilot treatment. Many savers buy an annuity and assume the decision is permanent. That approach costs money.
The annuity market evolves constantly. New products launch with better rates, fewer fees, or improved features. The annuity you purchased five years ago may no longer compete with what's available today. Insurance companies adjust their payout rates based on interest rates, mortality tables, and competitive pressure. A product that offered a 5.5 percent guaranteed income rate in 2022 might look weak against a 6.2 percent option in 2024.
Your personal situation changes too. Health events, inheritance, retirement needs, and family circumstances shift over time. An annuity structured around assumptions from a decade ago may no longer align with your actual goals. Some people buy immediate annuities but later need liquidity. Others purchase deferred annuities and discover they can access better tax strategies elsewhere.
Set-it-and-forget-it thinking creates three problems.
First, you miss rate improvements. Fixed annuities from insurers like Principal Financial, Fidelity, or Equitable often see rate changes annually or semi-annually. A 4 percent annuity from 2021 now trails competitors paying 5.5 percent or higher. That gap compounds over 20 or 30 years of retirement.
Second, you overlook fee creep. Variable annuities and indexed annuities carry ongoing charges for riders like long-term care add-ons, income guarantees, or death benefits. These fees shift as products are redesigned. Annual costs might rise from 1.2 percent to 1.5 percent without your awareness. Over a $500,000 annuity, that 0.3 percent increase equals $1,500 yearly.
Third, you ignore rollover opportunities. If you hold an annuity with poor terms, you can sometimes exchange it for a newer product via a 1035 exchange. This IRS provision allows tax-free swaps between certain insurance products. The rules are specific and require professional guidance, but opportunities exist for people paying attention.
What should active annuity management look like?
Schedule annual reviews with your financial advisor or insurance agent. Pull your annuity statement. Confirm the current rate, fees, and payout structure match your understanding. Compare your rate against current market offerings from the same insurer and competitors. Public databases and broker platforms like Immediateannuities.com or Cannex display current fixed annuity rates.
For indexed annuities, check the crediting strategy and participation rates annually. These terms reset yearly for some products. A 60 percent participation rate for the S&P 500 this year might drop to 50 percent next renewal.
Don't assume your annuity is locked in forever. Some contracts allow partial withdrawals or changes without penalties after a set period. Review your contract terms every few years to understand what flexibility exists. Surrender charges typically decline over time, making years 8 through 10 better times to consider switching than years 2 through 4.
Annuities provide stable income but demand oversight. The insurance product that solved your problem in 2015 may not be your best option in 2025. Regular comparison shopping and contract reviews catch better opportunities before they pass.