Can I sell my annuity?
Yes. There are a few different options available when seeking to sell an annuity. The most common are: 1) entirety, 2) partial, and 3) lump sum.
1) Entirety – selling an annuity pays out the entire investment as a lump sum and forfeits the annuity holder’s ability to receive future periodic payments. This is the most straightforward way to sell an annuity.
2) Partial – a partial buyout allows the annuity holder to sell a portion of his/her annuity payments and still receive periodic income without forgoing the tax benefits. For example, if the seller needs money immediately, he/she can sell years 1 – 5 of his/her annuity payments in exchange for a lump sum. After those five years have lapsed, the periodic payments will continue. Also, if the seller needs additional funds, he/she can buyout another portion of the remaining payments in exchange for lump sums.
3) Lump Sum – like a partial buyout, an annuity holder can choose to sell a portion of the annuity in exchange for a lump sum. This approach gives the seller more flexibility in choosing the amount of the lump sum, which would be deducted from future payments.
How to sell your annuity
There are many companies (called factoring companies) in the market to buy annuities. Since there are many choices, it’s best to contact various companies and secure a variety of quotes. If you decide to proceed with selling your annuity, here are some of the documents normally required to initiate the process: 1) signed agreement with the factoring company, 2) signed copy of your annuity contract, 3) change of ownership forms as required by the insurance company that issued your annuity.
Once the annuity buyer submits the required paperwork to the insurance company and if it is approved, you will then be able to collect your lump sum payment.
Wikipedia’s overview of factoring companies–this article does not touch upon transactions or sales of annuity payment rights.
What are the cons to selling an annuity?
There are some drawbacks to selling an annuity. For example, selling an annuity can incur a “surrender charge,” which can be as much as 10%. In addition, the seller won’t be able to collect any future payments from the annuity, which can be problematicin terms of retirement planning. Also, there are likely to be tax implications for selling your annuity.
Surrender charge definition at Investors.gov.
Taxes when selling your annuity
Are you concerned about the repercussions of a sale? Learn more about tax implications from selling your annuity.
Ameriprise Financial overview of annuity tax planning. Consider your taxes when selling annuity payment rights.