You can sell your annuity or structured payments for cash right now. If your financial needs have recently changed, selling the rights to these payments in exchange for a one-time payment from an annuity company can give you some financial flexibility. Annuities can be sold in installments or in full.

┬┐What Are My Options for Selling My annuity Payments?

Once you’ve determined how much money you need, you can choose to sell the entire value of your annuity, a portion of the total value for a lump sum, or a specific portion for a certain number of withdrawals.

Sell My Annuity in Its Entirety

Selling the full value of your annuity contract eliminates your assets. This eliminates all future income payments. However, you will have access to the full amount you negotiated with the buyer.

Sell Some of My Future Annuity Payments in a Partial Sale

If you choose to sell only a portion of your payments, you will still receive periodic income and retain your tax benefits. If you urgently need cash, you can sell a portion of your payments in exchange for a lump sum. For example, you can sell years one through four of your annuity payments for a lump sum. At the end of those four years, the periodic payments will resume.

Sell a Dollar Amount of My Annuity Payments for a Lump Sum

Similar to a partial sale, a lump sum sale allows the annuity holder to sell a portion of his annuity payments in exchange for a lump sum. This means that he or she will receive a specific dollar amount that will be deducted from future annuity payments or structured settlements.

How Will I Benefit From Selling My Annuity?

Selling an annuity may be the right solution for you to get liquid cash and financial flexibility when your needs change.

With direct access to your funds, you can pay off debt, make a down payment on a new home, replace a broken-down car or cover another pressing financial need. Whatever your reason for selling, having flexibility with your money can help reduce financial stress.

Selling all or part of your future annuity payments can also be less costly than taking out a 401(k) loan or withdrawing from an IRA. Be sure to consult with your financial advisor to compare options for your cash flow.

How Much Will I Receive for Selling Annuity Payments?

Selling an annuity is a business transaction. Factoring companies intend to make a profit on their purchases. This means that you will be offered a smaller amount than the full value of your annuity.

Accounting for the discount rate

The difference between the value of your annuity and the amount you receive in cash is called the discount rate. According to various reports, the average discount rate ranges from 9 to 18 percent. Higher rates are not uncommon.

The discount rate is essentially a payment for the ability to receive money immediately. It can also compensate for the administrative costs and lost profits of the buying company.

Understanding present value

The present value of an annuity is the total cash value of all future payments after accounting for the discount rate.

A lower discount rate means a higher present value, and vice versa. For example, you will save more money if one company offers a 10 percent discount compared to another company’s 14 percent discount.

Factors that can influence your discount rate include:

  • Total value of payments being sold
  • Number of payments being sold
  • Payment arrival dates
  • Economic conditions
  • Interest rates set by the Federal Reserve
  • Fees and charges

Some factoring companies may charge higher discount rates and commissions than others, resulting in the annuity owner receiving a smaller portion of the contract value. For this reason, it is important that you be aware of your sale and consider several offers.

Consult a professional before accepting an offer

Although it may cost you, reliable advice from an attorney or financial planner can save you thousands of dollars in the sales process.

Your advisor can alert you to a low offer or save you money on taxes.

He or she can also clarify misunderstandings about the process or explain confusing terminology, such as the bogus “structured settlement loan” that some companies use to refer to a sale with payments.

Annuity Sales Versus Structured Settlement Sales

The sale of an annuity does not require court approval. If you bought or inherited an annuity, the sale is a contract between you, the buyer and the insurance company. The entire process takes about four weeks. You can prepare for the sale with our answers to common questions about this transaction.

Unlike the sale of an annuity purchased through insurance companies, the sale of structured settlement rights is a legal process that requires court approval.

Another layer of protection for sellers is provided by the Structured Payment Protection Acts – state and federal laws that protect the rights of payout holders – which regulate buying companies.

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