August 28, 2026
3:42 am

An Annuity Was Sold to an 85-Year-Old

The fork that decides everything is the date the policy was delivered, because the free look period runs from delivery, and inside it the contract can be returned for a refund with no argument about suitability at all. Find the delivery receipt or the policy’s first page today. Everything else on this page is slower and harder.

The situation is familiar to anyone who has cleaned out a parent’s paperwork. An 85-year-old with modest income has moved a large share of liquid savings into a deferred annuity with a surrender charge schedule that runs into her nineties. She may have been told it was safe, or guaranteed, or better than the bank. The money that was supposed to cover a hip replacement and eight months of home care is now behind a penalty.

Not every annuity sold to an older person is improper. An immediate income annuity bought with a modest sum to guarantee lifetime income can be a sound choice at 85. A deferred contract with a ten-year surrender schedule and a bonus feature is a different animal. This page walks the forks in order and names the fact that decides each one.

In This Article

Fork One: Is the Free Look Period Still Open?
Fork Two: What Kind of Annuity Is It?
Fork Three: What Does Getting Out Actually Cost?
Fork Four: Was the Sale Suitable Under the Rules That Applied?
Fork Five: Was There a Capacity or Exploitation Problem?
Fork Six: Where Does a Life Insurance Policy Fit, If at All?
The Two-Week Order of Operations
Frequently Asked Questions

Fork One: Is the Free Look Period Still Open?

Every state requires a right to examine period. Ten days is a common floor, and many states set longer periods for annuities and longer still for buyers over 65, with 30 days appearing in a number of state codes as of 2026. Confirm your state’s rule with the state department of insurance and check the first page of the contract, which must state the period.

The clock generally runs from delivery of the contract to the owner, not from the application or the check date. If the contract was mailed and sat unopened, the delivery date may be later than the family assumes, and if delivery cannot be documented, that ambiguity works in the consumer’s favor.

If the window is open, return the contract in writing today, by a method that produces a delivery receipt, addressed to the carrier’s home office rather than to the agent. Keep a copy. Then confirm by phone that it was received and ask when the refund will be issued.

Fork Two: What Kind of Annuity Is It?

The product type determines who regulates it and what the money is doing.

Single premium immediate annuity. Converts a lump sum into income starting right away. There is normally no surrender value at all, which is the point, and it can be entirely appropriate at 85 if the sum was modest and income was the goal.
Multi-year guaranteed annuity. A fixed rate for a set term, with a surrender charge if you leave early. Reasonable in principle, but the term should not run past a realistic planning horizon.
Fixed indexed annuity. Credits interest tied to an index with caps and participation rates. These typically carry the longest surrender schedules and the largest commissions, and they are the product most often at issue in complaints involving very old buyers.
Variable or registered index-linked annuity. A securities product. This brings FINRA and the state securities regulator into the picture alongside the insurance department, which gives the family more places to complain.

Ask the carrier in writing for the contract type, the issue date, the surrender charge schedule year by year, and the current surrender value. Compare the situation to how an annuity compares with a life settlement if a policy is also in play.

Fork Three: What Does Getting Out Actually Cost?

Get three numbers from the carrier in writing before deciding anything: the account value, the current surrender value, and the surrender charge percentage this year and each remaining year.

Surrender schedules on deferred annuities commonly run 7 to 10 years, occasionally longer, starting in the high single digits or low teens as a percentage and declining annually, with wide product variation as of 2026. On a $150,000 contract, an 8 percent charge is $12,000, which is real money and is the reason to check the free look first.

Two features can reduce the cost of getting out. Most contracts allow a penalty-free withdrawal each year, often around 10 percent of the value. And many contain waivers that eliminate the surrender charge entirely in specified circumstances, most commonly confinement to a nursing home for a stated period, a terminal illness diagnosis, or disability. Ask the carrier directly whether a nursing home waiver or a terminal illness waiver exists in this contract and what documentation it requires. Families routinely pay charges that a waiver would have removed.

Tax matters too. Withdrawals of gain from a deferred annuity are ordinary income, and a Form 1099-R will follow. Ask the CPA before withdrawing, not after.

Fork	Deciding fact	Where to get it
Free look still open	Date the contract was delivered	Delivery receipt; carrier home office
Product type	Immediate, MYGA, indexed, or variable	Contract face page and carrier
Cost to exit	Surrender charge this year and each year after	Carrier, in writing
Waiver available	Nursing home or terminal illness waiver in the contract	Carrier policyholder services
Suitability	The producer’s documented basis for the recommendation	Carrier file; state insurance department
Capacity	Date of any documented cognitive diagnosis	Treating physician’s records

Fork Three: What Does Getting Out Actually Cost?

Fork Four: Was the Sale Suitable Under the Rules That Applied?

The NAIC Suitability in Annuity Transactions Model Regulation, substantially revised in 2020 to add a best interest standard, has been adopted in some form by a large majority of states, with more than 45 states having acted by 2026. Confirm your state’s status and effective date with its department of insurance, because the rule that applies is the one in force on the sale date.

Under those rules a producer must have a reasonable basis for a recommendation given the consumer’s age, income, liquidity needs, financial resources, risk tolerance and objectives, and must document it. Ask the carrier for the suitability questionnaire and the producer’s written basis for the recommendation.

Look for the specific mismatches regulators care about: a surrender period extending well beyond a realistic life expectancy, a large share of liquid assets committed, a replacement of an existing annuity that restarted a surrender schedule, or income figures on the form that do not match reality. A form showing a net worth that your parent never had is the strongest single finding a family can make.

Fork Five: Was There a Capacity or Exploitation Problem?

If your parent had a documented cognitive impairment before the sale, this stops being a suitability question and becomes a vulnerable adult question.

Call three places. Adult Protective Services in the county where your parent lives takes reports of financial exploitation of older adults and has an investigatory role. The state department of insurance investigates producer conduct and license status, and you can verify a producer’s license there before you call. If the product is a security, the state securities regulator and FINRA both accept complaints, and FINRA operates a dispute resolution forum.

Many states have also adopted rules allowing or requiring financial institutions to place temporary holds on disbursements when exploitation is suspected, and several have mandatory reporting for certain professionals. Ask the carrier whether its own senior protection procedures were followed.

Gather the medical records establishing the timeline of any diagnosis, and consult an elder law attorney in your parent’s state about civil claims. Do not accept an agent’s offer to fix it by moving the money again. See the red flags that show up in senior financial sales.

Fork Six: Where Does a Life Insurance Policy Fit, If at All?

Often it does not, and saying so is more useful than forcing a connection.

If the household’s problem is that money is locked inside an annuity for the next eight years while care costs are due now, a life insurance policy is a separate asset with a separate question. Check whether one exists and whether it is affordable, and check whether it has an accelerated death benefit rider, which can pay part of the face amount early on a qualifying diagnosis at little or no cost. That rider is frequently already in the contract and unused.

Selling a policy is the wrong answer when the face amount is small, when it is a burial policy the family will use, when a surviving spouse depends on the benefit, or when the insured is in good health, because buyers will not pay a useful price. It is also the wrong first move while a penalty-free annuity withdrawal or a nursing home waiver is available, since those cost far less.

It may be worth exploring where a large permanent policy carries an unaffordable premium, nobody depends on the death benefit, and the alternative is a lapse. Compare any offer against the cash surrender value and against a reduced paid-up option, and read the comparison of an annuity against keeping the policy first.

Pine Lake Legacy does not purchase policies and is not licensed in every state. A free policy review is education only, and questions about the annuity itself belong with the regulators, an elder law attorney, and your CPA.

The Two-Week Order of Operations

Families lose ground by doing these in the wrong order. Work down the list.

Day one. Find the contract and the delivery receipt. Read the first page for the stated right to examine period and the issue date. If the window is open, everything else stops and you return the contract in writing.
Day two. Call the carrier’s policyholder service line, not the agent. Request in writing the account value, the current surrender value, the full surrender charge schedule by year, the annual penalty-free withdrawal amount, and a list of every rider and waiver in the contract. Record the representative’s name and the date.
Day three. Verify the producer’s license and disciplinary history through the state department of insurance. This is public and takes minutes.
Week one. Request the complete application file: the suitability form, the producer’s documented basis for the recommendation, any replacement notice, and the disclosure documents your parent signed. Compare the income and net worth entries against reality.
Week two. Decide the path. If a waiver applies because of confinement or diagnosis, use it. If the sale looks unsuitable, file with the department of insurance and, for securities products, with the state securities regulator and FINRA. If capacity was compromised, report to Adult Protective Services and speak to an elder law attorney about civil options.

Keep one page listing every call, the name of the person you spoke with, the date, and what they said. In these disputes the family with a contemporaneous log is the family that gets taken seriously.

Frequently Asked Questions

Is it illegal to sell an annuity to an 85-year-old?

No. Age alone does not make a sale improper, and an immediate income annuity can be sensible at any age. What regulators examine is whether the recommendation had a reasonable basis given the buyer’s age, liquidity needs and resources, and whether it was documented. A long surrender schedule combined with most of a person’s liquid savings is what draws scrutiny.

Can we get the money back without a penalty?

Inside the free look period, yes, by returning the contract in writing. Afterward, look for the annual penalty-free withdrawal allowance, often around 10 percent of value, and for contractual waivers that remove surrender charges on nursing home confinement or a terminal illness diagnosis. Ask the carrier in writing which of these your specific contract contains and what proof it requires.

Who do I complain to first?

Start with the state department of insurance where your parent lives, because it licenses the producer and accepts free written complaints. If the product is variable or registered index-linked, add the state securities regulator and FINRA. Where you suspect exploitation of a vulnerable adult, contact Adult Protective Services in the county as well, and consider local law enforcement.

The agent says a new annuity will fix the first one. Should we?

Be very cautious. Replacing one deferred annuity with another usually starts a new surrender schedule and generates a new commission, which is the pattern regulators call churning. Ask for a written side-by-side comparison including both surrender schedules, and take it to a fee-only adviser or an elder law attorney before signing anything at all.

Does the annuity affect Medicaid eligibility?

It can, and the rules are technical. Whether an annuity is a countable resource or a stream of income depends on its terms, and rules for annuities in long-term care planning derive from the Deficit Reduction Act of 2005. This is not something to work out from a website. Ask an elder law attorney in your state and confirm current policy with the state Medicaid agency.

Should we cash in a life insurance policy to replace the locked-up savings?

Look at the cheaper options first: a penalty-free annuity withdrawal, a contractual surrender charge waiver, or an accelerated death benefit rider that may already sit in the life policy. Selling a policy makes sense only when the premium is unaffordable, the face amount is substantial, and nobody depends on the death benefit. Compare any offer against cash surrender value before deciding.

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