Selling annuity payments could be the solution for an array of financial woes. Whether that includes buying a new house, paying for a new car, paying for college tuition or even balancing medical expenses, cashing out a portion of your annuity could be the solution to avoiding unnecessary debt.
However, it is important to understand the risks when deciding to sell a portion or all of an annuity. Selling an annuity comes with a slew of transactional fees, interest fees, and other costs depending on how early annuitants withdraw funds. It can also reduce the number of future payments an owner or his beneficiaries receive.
Reasons for Selling
There are plenty of reasons for selling annuity payments, but some of the most common include:
- Losing a job
- Investing in a business
- Paying medical bills
- Paying off debt (student loans, credit card bills, etc.)
- Paying for school tuition
- Buying a new home
- Buyer’s remorse
Whatever the reason, it’s important annuity owners know the best selling options to cash out on their investment.
Annuity owners have several options when selling their payments, including selling the entire annuity, part of it, or a lump sum amount.
Prior to selling your annuity, it’s important to seek counsel. During your consultation with CBC Settlement Finding, our customer representatives will be able to answer any questions you may have regarding the selling process and offer suggestions. It is also important to consult your attorney or accountant before deciding to sell your annuity. In many states this is legally required.
The entirety — or straight — purchase is the most common option in selling an annuity. This strategy includes selling the annuity for the full term of the contract. This means the entire investment is emptied, providing the owner with a lump sum of cash in hand. The entirety purchase eliminates any chance to receive future income payments from the annuity contract, but in turn provides the opportunity to invest or pay off debt using a lump sum.
A partial purchase involves selling a portion of an annuity for a temporary period of time in exchange for a lump sum. If an annuity owner has a 10-year contract but needs money for a new car now, he can sell his annuity from years one to three in exchange for a lump sum. However, for three years, the annuity payments will stop. Once those years pass, he will begin to receive the steady stream of annuity payments for the remainder of his contract.
Lump Sum Purchase
Similar to a partial purchase, an annuity owner can opt to sell a portion of their investments in exchange for a lump sum. The difference is that the amounts are more specific. If an annuitant needs a set amount of money to repair a house, the amount will be taken from the future annuity income stream.
The Annuity Selling Process
Although the annuity selling process is easy, it can be a lengthy one.