1035 Exchange Surrender Recovery Calculator

See how long a 1035 exchange needs to run before higher credited yield and lower fees repay the surrender charge you incur today. Enter the cash value, surrender charge percentage, and the net yield lift from the new contract, then optionally add any annual fee savings to get a realistic recovery timeline.

Total accumulated cash value being transferred to the new contract.
Percentage haircut assessed if you exit the existing policy before its surrender schedule ends.
Increase in annual net yield you expect after fees and credits on the destination contract versus the current one.
Optional. Defaults to $0. Include recurring admin or rider fees you eliminate by exchanging.

Consult your carrier illustrations and advisor before executing a 1035 exchange. Assumptions here do not guarantee actual policy performance.

Examples

  • $350,000 cash value, 6% surrender, 1.2% net yield lift, $750 fee savings ⇒ Surrender charge hit: $21,000.00 USD • Annual yield lift: $4,200.00 USD • Annual fee savings applied: $750.00 USD • Breakeven timeline: 4.39 years (53 months) • Cumulative gain over 5 years: $24,750.00 USD
  • $210,000 cash value, 4.5% surrender, 0.8% net yield lift, fee savings blank ⇒ Surrender charge hit: $9,450.00 USD • Annual yield lift: $1,680.00 USD • Annual fee savings applied: $0.00 USD • Breakeven timeline: 5.63 years (68 months) • Cumulative gain over 5 years: $8,400.00 USD

FAQ

Can I include premium outlays in the calculation?

Yes. Add any ongoing premium reductions you expect after the exchange to the annual policy fee savings field so the model counts them toward recovery.

What if the new contract has a surrender period too?

Run the calculator with the expected yield lift once surrender charges step down. If you might exit earlier, reduce the cash value input to the amount you would keep invested until the new surrender schedule ends.

How do rider bonuses factor in?

If the receiving carrier adds a first-year bonus, include its annualized impact in the net yield lift percentage so the timeline reflects that incentive.

Does the tool consider tax deferral?

The exchange itself keeps tax deferral intact. Any future tax impact would stem from withdrawals or policy loans and should be modeled separately with a tax advisor.

Additional Information

  • Net yield lift should reflect credited interest minus all mortality and expense charges on both policies so the payback math mirrors actual cash value growth.
  • Adding annual fee savings can materially shorten recovery if you are leaving behind riders or admin fees that the new carrier does not charge.
  • Five-year cumulative gain shows how much value accrues if you stay in the new contract beyond the initial breakeven point.

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