What the Letter Actually Is
If a letter arrived referring to your contract's maturity date, annuity date, annuity commencement date, or maximum annuitization age, it is not junk mail and it is not a sales piece. It is notice that your contract is approaching the date, fixed when you bought it, at which the accumulation phase ends.
Every deferred annuity has one. The carrier can't hold funds in accumulation indefinitely, so the contract specifies an outside date — commonly the owner's 85th to 95th birthday, though older contracts sometimes set it earlier and some are tied to the annuitant rather than the owner. At that point the contract must do something: convert to a payment stream, pay out, or in some cases be extended if the contract permits.
These letters are frequently mistaken for routine account statements or marketing, set aside, and forgotten — especially when they arrive at a time of life when a spouse has died or an adult child is helping manage paperwork. Missing the response window doesn't pause the maturity date. It just means the contract's default provision governs instead of you.
Your Options at Maturity — and What Each One Costs in Tax
The specific menu depends on your contract, but the paths generally look like this. Each carries a different tax result, which is the piece the letter itself rarely explains.
Annuitize
Convert the contract into a stream of payments. Taxation follows the exclusion ratio — each payment splits into a tax-free return of your investment and a taxable earnings portion, spreading the tax over years. This is generally the gentlest tax treatment available, and it is generally irreversible: the lump sum ceases to exist as an accessible asset. The payout election you choose (life only, life with period certain, joint and survivor) also determines what — if anything — passes to your beneficiaries. A life-only election extinguishes the death benefit entirely.
Take a lump sum
Surrender the contract and receive the full value. Every dollar of deferred gain becomes ordinary income in a single tax year. For a contract holding decades of growth, this can push a New Jersey retiree into materially higher federal and state brackets, increase the taxable portion of Social Security, trigger Medicare IRMAA surcharges the following year, and interact badly with the NJ pension exclusion income limits. It is frequently the most expensive option and, in some contracts, it is also the default.
Extend the maturity date, where the contract allows it
Some contracts permit pushing the date out, sometimes by written request within a window. Where available this preserves optionality — but availability is a contract-language question, not a general rule, and it often must be requested before the deadline rather than after.
1035 exchange into another contract
Section 1035 permits exchanging the contract for another annuity, or in some cases a qualifying long-term care contract, without triggering tax on the deferred gain. The gain carries over rather than being recognized. This is the mechanism that makes repositioning possible at maturity without a tax event — though a new contract carries its own terms and its own surrender schedule, which deserve scrutiny rather than assumption. See 1035 exchanges explained.
What Happens If You Do Nothing
This is the question worth answering before the deadline, and the answer is written in your contract rather than in general law. Common default provisions include automatic annuitization under a specified payout option — frequently a life-only or fixed-period option the owner would not have chosen — or automatic surrender and distribution of the full contract value, which produces the single-year ordinary income result described above.
Neither default is inherently wrong. What makes them costly is that they're selected by contract mechanics rather than by anyone looking at your tax picture, your estate plan, or your family's situation. A default annuitization that ends the death benefit can quietly undo an estate plan built around that contract passing to children. A default surrender can generate a tax bill nobody budgeted for.
Why This Belongs in an Estate Planning Conversation
A maturity election isn't only a financial decision; it changes what your heirs receive and how they're taxed on it. Annuitizing under a life-only option means the contract's value stops at your death. Taking a lump sum converts a tax-deferred asset into cash that's already been taxed — which, depending on the family, may be better or considerably worse than leaving the contract intact.
And whatever remains at death passes with no step-up in basis, as ordinary income to beneficiaries, subject to New Jersey's inheritance tax depending on who inherits. If your estate plan assumed a particular annuity value would pass to particular people, a maturity election made in isolation can silently invalidate that assumption. The election and the plan should be looked at together, once, before the paperwork is signed.
What to Do When the Letter Arrives
- Note the deadline immediately and don't let the letter sit. Response windows are commonly 30–60 days.
- Find the contract itself, not just the letter. The maturity provision, the default clause, the available payout options, and any extension right are all in the contract language.
- Identify what type of contract it is — qualified (inside an IRA) or non-qualified. The tax analysis differs substantially, and qualified contracts carry their own RMD considerations.
- Determine the cost basis and the deferred gain. The size of the embedded gain drives the tax consequence of every option on the menu.
- Check the beneficiary designation while you have the file open. It may be decades old.
- Get the tax and estate consequences reviewed before electing — most maturity elections cannot be undone.
If the letter arrived because you're approaching the date on a contract you've never activated, the broader question of what an untouched contract has been doing all these years is covered on our page about what happens if you never turn on annuity income.
Frequently Asked Questions
Generally no. The maturity date is a contract term, and the carrier is obligated to act on it. Ignoring the notice doesn't preserve the status quo — it hands the decision to the contract's default provision. If you want the contract to continue, the question is whether an extension is available, and that request typically has to be made affirmatively and on time.
It appears on the contract's declarations or specification page, usually labeled maturity date, annuity date, or annuity commencement date. Annual statements often list it as well. If the contract is lost, the carrier can provide a copy — and requesting one is a reasonable first step regardless of whether a letter has arrived yet.
They are different tax outcomes, not better and worse in the abstract. Annuitizing spreads the taxable gain over years under the exclusion ratio; a lump sum recognizes all of it at once as ordinary income. Which produces the better result for a particular household depends on the size of the gain, other income, bracket effects, Medicare IRMAA thresholds, the NJ pension exclusion, and what the money is actually for. That comparison is worth running with real numbers before the deadline.
Whoever holds valid legal authority — typically an agent under a durable power of attorney with sufficient financial powers, or a court-appointed guardian. Carriers will require documentation before accepting an election from anyone other than the owner. If no power of attorney exists and capacity is in question, that becomes the urgent issue, because the maturity deadline will not wait for a guardianship proceeding.
It can, significantly. A deferred annuity is generally a countable asset for New Jersey Medicaid, while a properly annuitized stream is analyzed as income — and whether an annuitization satisfies Medicaid's specific requirements is a technical question the maturity paperwork won't address. If long-term care is a realistic prospect, the election should be reviewed alongside how NJ Medicaid treats annuities before it's made.