What Is An Annuity?
An annuity is a product sold by insurance companies that requires the company to pay you a set amount of money over a specific period. An annuity is often purchased as an insurance that an individual will receive as an income post-retirement. Payment may be received in monthly, quarterly, or annual installments.
Payments for annuities may be deferred or immediate. In a deferred annuity, you are paid after your money has been invested for a specific period. In an immediate annuity, you can receive income as soon as you invest in the annuity.
Annuity payments may also be fixed or variable. In a fixed annuity, the insurance company agrees to pay you back a set number of payments including interest. In a variable annuity, the insurance company directs your annuity payments towards investment products, usually mutual funds, and your income varies depending on the performance of the fund.
What Options Do I Have For Selling Annuity Payments?
Selling annuity payments requires careful consideration of both your immediate needs and your future investment. Annuities can be a powerful savings tool to secure your future, but sometimes immediate cash needs may be more pressing. The first decision you must make is whether you would like to sell off your annuity in part or whole.
When selling a partial annuity, you are selling off a portion of future payments, or the income that you would have received, in exchange for immediate cash. In this structure, you will still continue to receive payments off the unsold payments.
Selling an entire annuity allows you to receive immediate cash for the full value of the annuity as agreed between you and the buyer. As the name of this type of sale suggests, you would be forfeiting any future payments on the annuity when the sale is complete.
How Can I Sell My Annuities?
Once you have considered your options, you must learn about selling annuities. There are a few steps to selling off your annuity:
Step 1: Find A Company To Purchase Your Annuity
In the United States, there is a secondary market that specializes in purchasing annuities from individuals that would prefer immediate payouts rather than waiting for their annuities to mature. Buyers of annuity payments are usually professionally-licensed and regulated. You can avoid scams by ensuring the company you want to sell to is licensed and listed with consumer protection organizations such as the Better Business Bureau. Also, research what other sellers say about the company, so you know what to expect.
Step 2: Research The Best Price
There are several annuity buyers that you can consider when selling annuity payments, so it is up to you to ensure that you get the best price by shopping around. The price that a company will quote is based on a few factors such as how much you are looking to sell off, the length of time and the structure of the payments, and the state of the economy. Settlement companies will also include a service fee into the price, so it would be prudent to be aware of those as well. The quote you receive will also likely be discounted from the current value of your annuity.
Step 3: Start The Legal Process
Different states have different legal processes that govern the process of selling annuity payments. These laws are set up for your protection to ensure that you are completing the transaction in your best interest. Once you have decided on a price that you are willing to sell to an annuity buyer, you and the company will then come up with a contract which has to be submitted to a judge for approval. In addition to looking out for your interests, the contract is reviewed to ensure that you pay the required Federal, State, and Local taxes.
Step 4: Receive Your Cash!
What Are Good Reasons For Selling Annuity Payments?
There are many reasons why one might prefer immediate cash over waiting for their annuities to mature. Reasons you might sell include:
- Paying off unforeseen debt
- Making necessary repairs to your house
- Paying retirement related expenses or medical bills
- Investing in better-performing investment tools
- Ensure you have a good purpose for the cash. Otherwise, it would be better to keep your money safe in the annuity for when you retire.