An annuity is a contract between a person and a third party, like an insurance company whereby the company promises to do four things if that person makes a lump sum payment. The company does four things:
- Provides a death benefit
- Provides long term care benefits
- Provides income for a certain period of time or even for life
- Provides for asset growth or accumulation
Basically, there are two types of annuities, immediate and deferred. With an immediate annuity, a person receives payment soon after they make their initial investment. For instance, one might consider getting an immediate annuity as they approach their retirement age. On the other hand, the money is invested for some time until one is ready to start making withdrawals, which is typically in retirement. The immediate annuity pays out while the deferred annuity accumulates money. A differed annuity can be converted into an immediate annuity if the owner wants to begin collecting payments.
Fixed or Variable Annuity
In both categories, an annuity could be either variable or fixed dependable on whether the payout is a group of investments or a fixed sum tied to the performance of the market or it could be a combination of both. The key principle of fixed is that it is guaranteed by the company but with variable, it will vary with the investments.
Selling Annuity Payments Options
Partial vs. Entire Annuity Selling
Partial sale: When you decide to sell a part of the annuity payments, you will still continue to receive annual payments in either of two different ways. You can decide to sell a period of the payments and you will not receive any payments for that period but, the payments will resume after that period is over. The other option is selling a portion of the payments and still receive continual payments but, they will be less or only a part of what they were before the sale.
Entire sale: Selling annuity payments entirely means that you clear out your settlement annuity or investments all at once. This will bring your scheduled payments to an end but you will end up with a large sum of cash.
How To Sell Your Annuity Payments
When selling annuity payments, you could start by contacting your insurance company to see if they can cash it for you for its value without having to sell. This way, you might end up with a lot more because you won’t have to pay the fees that come with selling. However, you are likely to pay a penalty for cashing it and since different annuities come with different terms, it is best you consult your insurance company.
If that does not work, you can use the secondary market, where you contact a company to buy off the annuity from you. There are numerous companies offering these services and you can look them up on the internet or ask your insurance company for a recommendation. Make sure you check the company reviews to ascertain the reputation before you make a deal and don’t settle for the first company, do some comparison for the best deal in the market.
You should compare what the insurance company is offering you to what the companies are offering. Make sure you get the best rates or penalty fees from the company you choose.
Reasons for Selling Annuity Payments
Some of the most common reasons people result to selling annuity payments are:
- Buying a home
- Starting or investing in a business
- Purchasing a new vehicle
- To pay for medical bills
- Repairing their home
- Paying off debts
- Sending kids to college
- Loss of employment
Factors That Impact Annuity Sale
When you decide to sell your annuity payments, you need to consider the different factors that will come with the sale like the discount rates and tax implications.
Discount rates: When selling annuity payments, you will not sell for what it will be fully worth. If you want a large sum upfront, you will have to sell at a discounted price based on the predicted future interest rates. Be sure you ask the company you are selling to because the lower the rate, the more money you will receive.
Annuity value: Other different factors are how much you wish to sell it for, how much the buyer is offering, current economic conditions, fees and charges the annuity carries, frequency of your payments as well as the predicted future economic conditions.
Selling annuity payments does not have to be hard as long as you make all the right decisions. Selling your annuities could take anywhere from 45-60 days depending on your State. Once the court approves, you should receive the money within 72 hrs.