Can I sell my annuity?
Yes, you can sell annuity payments for cash. If an annuity does not fit your financial needs or desires, you can work with an annuity factoring company to sell some or all payments for a lump sum of cash. The most common options 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 annuity settlement/structured settlement, 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. Don’t worry, we’ll try to make it easy for you:
- Find an annuity company to work with. We are happy to help. Others would be happy to help. Contact various companies to give yourself the best chance for a successful deal.
- Receive your cash quotes. The companies you speak with will be able to provide an offer once you share details of your annuity payment amounts, payment schedule, etc.
- Review your offers. Which offer is best?
- Speak with an expert. Consult with a certified financial planner, tax attorney, or CPA who is familiar with annuities to better understand the impact of the transaction on your finances…if you are able.
- Sign the agreement. Sign the papers and make the deal official. Be sure to read carefully and maintain a copy for your records.
- Receive your money. You will receive your cash as soon as a couple of weeks and as far out as a few months, depending on the specifics of your transaction.
How much cash can I get if I sell my annuity?
The amount you receive will depend on various factors such as the size of your investment or structured settlement annuity, your payment schedule, the number of payments remaining, and the discount rate. The “discount rate” is the fee the buying company charges in order to make profit on the sale and will directly impact the amount of your lump sum. After factoring in all of these variables, you will be in a better position to decide if selling your annuity makes sense for you.
Also, it’s a good idea to ask any potential buyer for a detailed breakdown of their quote to ensure there are no hidden fees and all charges are transparent. Since there are various factors involved in formulating a quote, it’s a good idea to request quotes from more than one company to ensure you can make an informed decision.
Do I get cash quickly after starting the process of selling my annuity?
The actual process of selling an annuity can take a couple of weeks and up to 6 to 8 weeks if it is a structured settlement requiring court approval. As a result of this lengthy timeline, many companies (ours included) will pay you what’s known as an “advance.” Once you agree to move forward and sell us your annuity, we can offer you an immediate cash advance, provided you are qualified, which will be recouped later from the full amount after the sale is finalized. Our advances are interest free and there are no additional fees. If your need cash quickly, an advance can be a good way to secure some up front money to help pay any outstanding debts.
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 problematic in terms of retirement planning. Also, there are likely to be tax implications for selling your annuity.
Taxes when selling your annuity
Are you concerned about the repercussions of a sale? Learn more about tax implications from selling your annuity.