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A Senior’s Guide to Selling Annuity

Many people purchase annuities as a means of diversifying their retirement portfolios. On the flip side, there are many factors beyond your control when it comes to planning for retirement. Sometimes, emergencies or sudden circumstances may arise wherein you may need cash upfront. As such, some seniors opt to sell their annuity payments for a number of valid reasons.

As a senior, you might ask yourself, “Is selling my annuity worth it?” —  especially since this is supposed to give you a steady stream of income during retirement. The answer depends on your particular situation, which a financial planner or lawyer can advise you on. But if the need for immediate finances is apparent, then the pros of selling annuity payments may outweigh the cons. 

Situations Where You May Need to Sell Annuity Payments

  • Pay off bills or debt - If you have bills to pay or are in some kind of debt, choosing to sell your annuity for a lump sum can help you manage this and whatever balances you need to pay off.  
  • Loss of income - As a senior, you may have retired or decided to step away from the workforce for any number of reasons. This may cause a drastic change in your cash flow, which could lead to selling your annuity. Whether through partial or full selling, many people decide to sell their annuity as a temporary fix for their loss of income.  
  • New opportunities - New business or investment opportunities may come your way, which you will need to fund. Selling your annuity can help fund your capital or any other expenses that come with these new ventures.

Options to Sell Annuity Payments

Before you decide to sell your annuity payments, it is important that you know what your options are. Here are the different paths you can take when annuity selling:

Sell Your Entire Annuity

Should you choose to sell your entire annuity, you will get a lump sum of your liquidated money in one go. 

Sell A Portion Of Your Annuity

Selling a portion of your annuity means that you will cash in only a part of it through a partial buyout while saving the remainder of it. You will receive payments on the rest of your annuity as previously intended.

Sell A Period Of Your Annuity

You may also choose to sell just a period of your annuity which is an agreed length of time, and then continue receiving payments when this period has lapsed. 

Step-by-Step To Selling Your Annuity Payments

  1. First and foremost, consult with the legal team of your financial advisor. They can help you weigh out the pros and cons of selling your annuity payments, and possibly give you other alternatives which may suit your situation better. 
  2. Shop around for quotes so that you get the best deal. Buyers can also answer any questions you might have ahead of time. You will also get a clearer idea of what all your options are from each buyer, together with what the discount rates are.
  3. Choose the best offer and fill out all the necessary paperwork. Once the transfer of ownership has been made, you will have to wait for notarization. 
  4. As soon as you are approved, your sale should go through. States typically have different laws regarding requirements, regulations, and the like. Check out your state’s laws on selling annuity payments. 
  5. Judges will then review all of this information and you will have to show up in court to defend your case. Should you be granted approval, you will receive a transfer order from the issuing company, and then receive your money.

Frequently Asked Questions

The thought of selling your annuity may still be quite confusing. That said, we’ve answered some of the most common questions about selling your annuity payments.

Can I Sell My Annuity For Cash?

You can sell your annuity, whether it is your current or future payments, for cash. You will have the option to sell it in increments or as a whole. If you choose the former, you get a lump sum of cash upfront. Afterward, you will receive payments on a periodic basis. Should you choose the latter option, you give up receiving future payments on a periodic basis.

What Happens When You Sell An Annuity?

When you decide to sell an annuity, the length of time you will have to wait before receiving your money will depend on your chosen buyer, state regulations, and how long it takes to gain approval, especially from a court or insurance company. It may take up to around ninety days before you receive your cash after selling your annuity.

How Much Does It Cost To Sell Your Annuity?

The cost of selling your annuity depends on the discount rate you are given by your buyer. Buyers will charge a certain amount in exchange for your desire for receiving the cash. Lower rates mean that you will profit more from your payout. 

What Happens If You Cancel An Annuity?

If you cancel an annuity, you will at the very least need to pay the income taxes from the taxable amount received. Surrender charges may apply if you have owned your annuity for around seven years or less. 

Can I Cash Out An Annuity Early?

You can cash out your annuity early by looking for buyers. Once you have quotes from different buyers, you can choose which one gives you the best discount rate — which is usually between 9–18%. After all the paperwork has been processed and you gain a judge’s approval, you will be able to cash out your annuity early.

Selling annuities may not be for everyone, therefore this is a major decision you may have to contemplate on. Be sure to take your time assessing the risks, and consult with experts to see if this is the best fit to your particular situation.  

For alternatives to earning regular income as a senior, check out some of our past articles for more advice on all things retirement!

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