How do I sell my Annuity?
Selling an annuity is relatively common and painless.
Unlike selling your structured settlement
annuity, if I want to sell my annuity, it does not require a court
order. You simply sign a contract, record a change of ownership with the
insurance company that issued the annuity, and once the ownership
change is complete you receive your lump sum payment.
The process begins with a simple discussion with
an annuity purchaser, (these are the same folks who will also buy
structured settlement annuities),you provide them with information about
your annuity, the payments you receive and when they are due,, and they
give you a quote to buy some or all of your future payments. Of course
you decide how many payments you want to sell and which ones you want to
keep. This allows you to get the lump sum you need today and continue
to receive payments over time as well. Of course you can always sell all
of your annuity payments to get the largest lump sum possible.
Frequently Asked Questions
Time Value of Money
Money today is always better than money tomorrow
right? That’s correct as long as that money you get today is invested
and allowed to grow. For example if you invest $1,000 at 5% interest
rate and compound it for 10 years, you would have $1,628. But if you
have a structured settlement annuity that pays you $1,000 ten years from
now, you will receive only $1,000 in 10 years. So having the $1,000
today is more valuable than having $1,000 in the future.
Inflation
Inflation is the increase in the value of
materials, goods, and services without the corresponding increase in the
value of the currency. If you purchased an annuity in 2003 that
guaranteed you $1,500 per month for life, it might cover your rent and
utilities, and maybe some left over for groceries. Now, fast forward 10
years and maybe that guaranteed payment no longer covers your groceries
and not all your utilities. That is inflation.
Selling A 10 Year Annuity
Let’s say you have 10 years of payments of $833
per month. The total amount of all the payments would be about $100,000
over the ten-year period. But you can only expect to get somewhere from
$55,000 - $70,000 in cash for your structured settlement annuity if you
sell it today, but this value assumes your structured settlement
annuity payments start right away.. If the structured settlement
annuity isn’t set to start making payments for a few years, the value
decreases to around $30,000-$50,000. Obviously the value of the annuity
depends heavily on the timeliness of the cash payments.
When Selling an Annuity, you need to decide whether or not to Surrender it. Here are some things to consider:
Penalties
Keep in mind that depending on the tax status of
your annuity funds, you may be penalized from Uncle Sam far more than
the insurance carrier. In the case of an IRA you do not have access to
those funds until the age of 59.5 and at that time you still have to pay
taxes. If you try to access that money prior to the age of 59.5 then
Uncle Sam will punish you much harsher.
Needs Change
At the time you purchased this product you had
different goals and objectives. Now that some time has passed you have
come to the realization that you need this portion of your total asset
to create a different path or strengthen an income or legacy goal you
now have. One of the biggest draws to an annuity sales these days are
the riders. The riders have become more and more enticing over the past
10 years and are providing people with a stronger, clearer and
guaranteed benefit.
Mine, Mine, Mine
You can always get out of your annuity and
structured settlement and why not? It is your money after all and if
you are an adult you shouldn’t require an insurance home office or judge
to determine when and how you get your money.
Things Happen
Things happen daily and tragedy never strikes
the proper people or places. It is how it got its name in the first
place. Surrendering a policy is always an option and when someone needs
some instant cash this is easily the best & safest way to obtain it
for it is not a loan nor are you placing your home, car, etc. on the
line in order to obtain the cash you need now.
They Don't Make Them Like They Used To
Every time I hear this phrase it brings a smile
to my face and a disbelief of the people who are still fooled by this
premise. If you have any type of sales or marketing background you will
be fully aware that they truly DO NOT make them like they used to and
for the simplest reason ever. They can’t sell you something again and
again and again if they make it too good or solid the first time. I
hear this most often when older people are referring to cars and we all
know where the auto manufacturing industry is. We also know the beast
that is the technology and cell phone industry and how often new models
are released and how the majority of us drink the kool-aid and continue
to buy, buy, buy. Some annuity policies today offer upwards of a 50%
Bonus and a guaranteed annual roll up rate of 10% or higher. The policy
you have may not have had all the bells and whistles todays policy has
and it might be the perfect time to look at some other options with the
surrender value you currently have.
Penalties, Surrender Charges and Fee’s Oh My
The majority of the companies that are
purchasing annuities and settlements from companies often bear the brunt
of these items. They do it based on the long term earnings and
potential. Considering this is always an option I definitely suggest
looking into what your annuity or structured settlement is worth.
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