Selling Annuities

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.

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.