Section 1035 of the U.S. Tax Code

U.S. tax code Section 1035 gives you as an investor the opportunity to exchange your current variable annuity contract for a new annuity contract, most importantly is, this code allows you to do this without paying taxes on the income earned from the old variable annuity. However, there may be surrender charges on the current contract in exchange for a new contract. It is very important to check if you are in the "surrender charge period". Also, when you exchange for a new contract there may be a new "surrender charge period".

The surrender charge period can be for as long as 10 years and as high as 9% of your purchase payments if you withdraw your funds from the new annuity. In addition, it's critical to consult with a financial advisor because there may be other hidden fees as well as higher annual fees and charges that will reduce your return on investment.