Annuities are great tools to help you save for retirement. They can provide a guaranteed income stream in retirement. However, they usually require a long-term commitment to being effective. Many people worry their money will be locked away forever if their financial situation changes. Thankfully, you can get cash for selling your annuity if you need to. In this article, we’ll explain what it means to sell an annuity and how it works.
How Does Selling an Annuity Work?
An annuity is a type of life insurance contract that gives you periodic payments. When you buy it, you agree to pay the insurance company the money now. You can use the proceeds to pay off bills or invest in stocks and bonds. Many companies buy annuities from individual customers. They usually offer a lump-sum payment instead of future payments.
3 Ways to Possibly Sell Your Annuity
1. Sell the Entire Annuity
You can liquidate all or part of your annuity to get a lump-sum payment from the new owner. It eliminates the possibility of receiving future payments. After the initial four years have elapsed, you will begin getting your periodic payments from the leftover balance.
2. Sell a Portion of Your Future Annuity Payments
Some people can also sell a portion of their annuity. For instance, if you sold the first four years of your payments, you will receive a lump-sum payment now.
3. Sell a Dollar Amount of Your Future Payments
You can also get rid of a portion of the future payments that you’re supposed to receive. For instance, let’s say that you’re planning on receiving $1,000 a month for the rest of your life. You could sell a portion of that payment for $300.
How to Sell Your Annuity
The process of selling an annuity can be a bit challenging depending on the type of contract you have. However, most of the time, it’s simple to do. You should first do research into annuity sales companies. Be sure they are reputable and have good reviews from previous clients.
Once you have narrowed down your search to a few companies, ask for quotes to compare. Get in touch with the company that provides the quotes and they’ll give you a cash offer. Generally, it takes about a few minutes to receive the offer.
If you have a financial advisor, speak with them about selling your annuities. They will be able to help ensure you get a fair deal. Last, you will complete the paperwork. Be sure to read the forms of the contract thoroughly before you sign. Once complete, you will receive your money in as little as a few weeks to months. Some companies offer cash advances sooner, but you will probably be charged a fee.
Selling or Withdrawing from Annuities
Although selling an annuity may be cheaper than keeping the same contract, it’s still important to consider the long-term benefits and costs of doing so. Although it’s possible to get rid of an annuity early, it’s important to weigh the costs and the benefits of the deal. Generally, there’s a surrender period for each type of annuity.
Before you can withdraw from your account, make sure that you avoid paying taxes and other fees. Since the sale of an annuity is usually conducted for profit, the buyer typically pays less than the future payment that you’re supposed to receive. In addition, there are often fees involved in the transaction.
Types of Annuities to Sell
Most companies buy immediate annuities instead of waiting for the accumulation of the contract to happen. Some companies buy fixed annuities, such as the multi-year guaranteed annuity. However, they tend to avoid buying variable or fixed index annuities since they are more prone to volatility.
Remember that selling an annuity is not allowed if it’s part of a pension plan or an IRA. You also cannot liquidate other regular monthly payments such as child support payments.
How Much Can Annuities Sell For?
Although selling an annuity is a business transaction, it’s not a done deal. Companies that sell annuities are usually looking to make a profit, so they typically ask for less than the total value of the contract. Keep in mind that taking a cash payment for your annuity is considered regular income. This means that you will have to pay taxes on the money you receive.
Be Aware of the Discount Rate
The discount rate is the amount that the company is willing to pay for the annuity. It shows how much they are willing to pay for the contract. With a lower discount rate, the company will charge less to sell the annuity and the more you will receive for it. It’s also known as the present value of your future payments.