Consider selling your annuity payments for a lump sum to cover unexpected expenses like medical costs or home repairs. Acquiring extra funds now may help ease financial pressure in an emergency situation.
Before making the decision to sell, take time to consider both short- and long-term financial goals before making the call to do so.
Why You May Want to Sell Your Annuity Payments
An annuity is a type of life insurance product that allows you to receive regular income payments from an insurer in the future, potentially supplementing retirement income or building tax-advantaged savings accounts.
At some point in your annuity ownership journey, there may come a time when it becomes necessary for you to sell it – often due to needing access to funds more immediately or meeting other financial obligations.
There are various strategies available for selling annuity payments, and the one best suited to you will depend on your individual circumstances and desired objectives. When making this decision, take into account how much cash is needed as well as your long-term financial goals.
Selling an annuity may help you take advantage of opportunities not possible with your original plan. For instance, you could use your cash to invest in stocks or other risky assets, or pay off debts like credit cards or student loans with funds obtained by selling.
Alternately, you could sell only part of your annuity payment schedule — for instance the first four years in a 20-year annuity contract — thus still receiving periodic income but without receiving lump sum payments anymore. After this period has expired, however, your annuity payments will resume in their original amount.
One method for selling annuity payments is through a lump sum sale. This method allows you to specify an exact dollar amount you would like in cash from your annuity payouts; providing greater control of how it’s distributed from it. However, you will incur a discount rate which reduces its value significantly and can drastically alter how much you receive in return.
As you make the decision whether or not to sell your annuity payments, keep this important step in mind: this decision requires careful consideration and should be discussed with a knowledgeable financial advisor. Discuss how it fits into your overall retirement planning strategy and shop around for buyers that provide the best service.
Tax Implications
Selling Annuity Payments may have tax implications that vary depending on your unique circumstances. A lump sum payment could provide the cash needed quickly to take advantage of new business opportunities, purchase property, or settle debts quickly.
IRS has specific tax rules regarding this transaction, so make sure that you fully comprehend their rules prior to taking any steps. Typically, any amount received through sale is taxed to the extent it exceeds both cost of annuity (including investment returns and earnings on this cost) and earnings on that cost.
However, long-term investors in annuity contracts benefit from more straightforward tax treatment. Your net investment at the beginning or first payment date (whichever comes first) of the annuity contract is the cost and any refunded premiums, rebates or dividends received as tax free returns and not subject to income taxation.
If you want to sell your annuity, the easiest way to obtain a free quote is through filling out a simple online form or calling. Most factoring companies can give a quote within minutes or days; some could take as long as two.
When comparing quotes, make sure that the company offers the lowest discount rate possible. This rate determines an offer that’s fair to you – the higher it is, the less money you’ll receive back as repayment.
Keep this in mind when considering whether to sell or keep your annuity: this is an important decision. Carefully explore all available options, weighing both their advantages and disadvantages before selecting one; compare offers until you find one that is the best fit for you.
Legal Requirements
When selling an Annuity Payment, it is essential that you are aware of its legal requirements. The first step should be obtaining court approval – typically 45-90 days in cases involving personal injury lawsuits – to make sure it makes financial sense and that funds are not fraudulent.
Step two is determining whether to sell all or just some payments of your annuity annuity payments. A partial sale could be beneficial if you need cash right away but want to maintain its tax benefits.
An annuity can also help pay down debt and medical bills, cover college tuition or add funds back into your retirement plan. But before selling it off entirely, make sure that you understand both short and long-term financial goals, and how selling off any lump sum annuity payments might alter these goals.
An experienced agent or broker will help you assess if an annuity sale makes financial sense, as well as explain any contract terms or provisions that you don’t comprehend. Be wary of anyone trying to pressure you into signing an annuity sale contract immediately.
An annuity buyer’s offer will depend on its discount rate; that will dictate how much money it expects to make from future annuity payments from you over time. When selling an annuity payment, shopping around and comparing different offers from multiple annuity buyers is the key to making an informed decision about selling or not selling it.
Factoring companies typically offer free quotes within minutes of providing your information; be mindful that some may charge an additional flat fee on top of their discounted rate when making your final decision.
If you own an annuity through a structured settlement, investment or inheritance, its sale for cash without tax consequences should it not have been subject to taxes when received. Divorce settlements, child support agreements, 401(k) distributions or Social Security benefits prevent selling an annuity as it’s taxable when received and cannot be sold as such an annuities are non-saleable assets.