Did you buy a deferred annuity that offered a great rate that, unfortunately, fell? Are there better annuity rates out there? You may have resigned yourself to waiting until the surrender period runs out. Why not take advantage of an oft-overlooked section of the IRS tax code called a 1035 partial annuity exchange? A partial annuity exchange offers annuity buyers the ability to move a portion of an existing annuity into a higher-rate annuity, tax free.

With most deferred annuities, you are allowed to take out a maximum of 10% of the account value, every year, without paying surrender charges. This 10% could be used to purchase a higher rate annuity, if you are currently suffering from the low interest rates provided by an underperforming annuity. Every year thereafter, until the surrender period has passed, you can take an additional 10% withdrawal and funnel them into an annuity with a higher rate. Moving funds from annuity to annuity using a partial 1035 exchange makes it easy to take advantage of better rates without paying taxes on the annuity move at the end of the year. If your annuity is non-qualified (not categorized as an IRA) you should not take any interest withdrawals from either the old or new annuity for at least 12 months in order to avoid taxation of the exchange.

What if there is only a small difference between annuity rates, say 1%? Because of deferred annuities’ tax deferred status, even a small bump in an annuity’s interest rate adds up. Yearly tax bills on other savings methods decrease the amount of money you save over time. But with a deferred annuity, the money normally used to pay taxes grows along with the principal used to purchase the annuity. A smart move for those with underperforming annuities is to take advantage of the IRS’s partial 1035 exchange rule and start the process of buying an annuity with a better rate.

A partial exchange could be the boost that your retirement savings needs. To learn more about the partial 1035 exchange process and to get the best annuity rates from over 40 insurance companies, call the Annuity Specialists from BuyAnnuitiesOnline.com at 1-800-994-3023, or check out the latest annuity rates online at http://www.buyannuitiesonline.com.