Annuities in Florida

Florida writes more protection for annuity buyers into statute than most states do, and the strongest piece of it kicks in at age 65. If you are 65 or older, state law caps what a surrender charge can cost you and forces that charge to disappear entirely after the tenth policy year. Anyone comparing annuities in Florida should know that rule before the first meeting, because it quietly rules out some of the longest and most punishing contracts on the market.

Florida Caps Surrender Charges For Buyers 65 And Older

Under section 627.4554(9) of the Florida Statutes, an annuity contract issued to a consumer age 65 or older cannot carry a surrender or deferred charge greater than 10 percent of the amount withdrawn. The charge also has to step down to zero by the end of the tenth policy year, or ten years after each premium payment if you fund the contract more than once.

Two things follow from that. A fifteen or twenty year surrender schedule, which still shows up in other states, is off the table for most Florida retirees. And the worst case cost of getting your money out early is a known number rather than a surprise. There are exceptions in the statute, including contracts bought by accredited investors and certain employer plan funding, so ask where your situation falls.

No State Income Tax Changes The Arithmetic

Florida has no personal income tax, so the taxable portion of annuity payments is taxed federally and not again by the state. For a retiree who moved here from New York, New Jersey, or Ohio, that difference can be worth more than a small variation in the interest rate between two carriers.

It also affects timing. In states with an income tax, people sometimes delay turning on income to manage a state bracket. In Florida there is no state bracket to manage, so the decision comes down to federal treatment, required minimum distributions on qualified money, and what you actually need to live on. Have your tax preparer confirm your own numbers before you start payments.

Florida Shields Annuity Money From Creditors

Section 222.14 of the Florida Statutes exempts the cash surrender value of life insurance policies and the proceeds of annuity contracts issued to Florida residents from most creditor claims. The protection is broad by national standards and it applies to fixed, indexed, immediate, and deferred contracts.

The exception written into the statute is an annuity arranged for the benefit of the creditor itself. Timing and intent also matter, and transfers made to defeat an existing judgment do not get the same treatment. This is one to review with a Florida attorney rather than assume, especially for physicians, contractors, and business owners who carry professional liability exposure.

What Happens If The Carrier Fails

The Florida Life and Health Insurance Guaranty Association stands behind covered contracts if a member insurer becomes insolvent. For deferred annuities the protection is generally up to $250,000 in net cash surrender value per contract owner per company, with a separate limit for annuities already paying income. The association publishes the current figures in its consumer questions.

Treat that as a backstop and not a reason to relax about carrier quality. We place business with companies rated A or better by AM Best, and for larger amounts we often split the money across two carriers so no single contract sits above the coverage line.

Ask For The Agent Disclosure Form

Florida holds agents to a best interest standard on every annuity recommendation. Before a recommendation is made, the agent has to give you a disclosure form covering the scope of the relationship, which products they are licensed to offer, which insurers they can place business with, and how they are compensated. You can also ask for a reasonable estimate of that compensation, and the agent has to provide it.

Ask for it every time. A person who hands it over without hesitating is a person comfortable with how they work.

Comparing Two Florida Contracts

• Guaranteed column first. Illustrated index values are context, not promises.
• Surrender schedule. Confirm it fits the Florida cap if you are 65 or older.
• Free withdrawal allowance. How much you can take each year without a charge.
• Carrier strength. AM Best rating and how long the company has been paying claims.

We work on the fixed and index linked side. Variable annuities are securities and require a registered representative. The mechanics are laid out on our national page for annuities, and the tradeoffs of index crediting are covered in our article on fixed indexed annuity pros and cons.

Guaranteed income is one piece of a retirement plan. Families who also want liquidity and something to pass on often pair a contract with whole life insurance rather than choosing between them. If someone has put a proposal in front of you, schedule a conversation and we will read the surrender schedule and the guaranteed column with you.