Everything You Need to Know About Selling Annuities

Partial and Full Sale

Cashing in your annuity comes with a lot more flexibility than you might think. You can choose between one of two options: a partial sale or a full sale. A partial sale is when you only cash in part of your annuity and save the rest to continue receiving on a regular basis over your payout period.

The second option is selling annuity payments for the full amount. In this instance, you’ll receive an offer that is valued at less than your total remaining annuity amount. But you could potentially benefit from receiving those funds up front rather than getting small amounts on a regular basis over a long period of time.

Before you make a rash decision, think about both your short-term financial goals as well as your long-term goals. Every individual has a different reason for selling their annuity but you want to make sure you capitalize on current opportunities while still feeling comfortable about your financial future.

Every person should have some type of monetary safety net. If you’ve never had one before, your annuity could serve as that buffer. But if you’re having financial issues right now, you may be tempted to sell at least some of your annuity.

Choosing between a partial and full sale is a major decision. Luckily, it’s not one that needs to be made right away. Instead, you can solicit offers from annuity buyers to get an idea of what you should expect in terms of both the financials and the process to make sure it really works for you.

4 Easy Steps to Selling Future Annuity Payments

In just a few simply steps, you can convert your annuities into cash. This easy process helps you get cash now to help pay your bills or invest in your future, without having to wait. Discover the best way to get cash for your payments so you can gain control over your finances once and for all.

Common Reasons to Sell

There are a multitude of reasons as to why you might consider selling your annuity payments. Before we dive into some of the most common reasons, you first need to understand that this can’t be a decision made on a whim. It also can’t be made for frivolous purposes like going on a vacation or paying for your dream wedding.

The reason is because a judge must approve the transaction and the ruling is based on whether or not the sale would be in your best interest as the seller. Basically, the judge wants to make sure you fully understand what it means to sell your annuity, how much you’ll receive, and that you’ll still have a bright financial outlook that doesn’t involve squandering your annuity cash out.

That being said, here are some of the most common reasons people choose to cash in on those payments rather than receiving regular amounts over a set period of time.

Job Loss: Whether you’ve lost your job based on the inability to work due to an illness or accident related to your annuity or you’ve simply stumbled upon hard times, people often choose to get a full or partial lump sum to help tide them over until replacement income is found.

Investment Opportunities: You can also sell your annuity to take advantage of a new business opportunity, launch your own company, or even pay for your own home.

Pay Debt and/or Medical Bills: A lump sum can save you money over time if you’re paying on a lot of debt. This could include balances from credit cards, student loans, auto loans, and medical debt. Depending on how much you owe and how much you’re paying each month, cashing out your annuity to help reduce those balances could be extremely beneficial.

Education: Whether it’s for you or a family member, paying college tuition or other education expenses with your annuity payment can be extremely beneficial. Not only can you potentially save on interest from student loans, you can also set yourself up for better earning potential with a more advanced degree.

Discount Rate Explained

Perhaps the most important aspect of your offer when selling an annuity is the discount rate you’ll be giving the buyer. This is how much of a discount they’ll essentially receive since they’re giving you the money up front and settling for years of payments that will devalue over time.

Here’s an example. Say your remaining annuity payments total $100,000 over the next ten years. Your buyer won’t give you the full $100,000 because the value of those monthly payments over the next ten years will decrease thanks to inflation. Instead, you might hypothetically receive an offer of $60,000 – or more or less depending on the buyer.

That difference between your remaining annuity and your cash out amount is the discount rate. This is why it’s so important to compare offers from buyers so you don’t give too much of a discount. It’s standard practice in the industry but you still want to make sure you’re not being taken advantage of. A reputable buyer will explain how they reach the valuation of your annuity so you understand the calculation of what it’s worth today.

While selling your annuity does take some time, the decision-making process isn’t one you’ll want to rush through. Compare your options and really think about the best option for your situation, including how much you want to cash in.

Pros and Cons of Selling Annuities

Selling an annuity can be a beneficial thing for you. But just like any major decision in life, it can come with both pros and cons. Run through this list and think about how each advantage and disadvantage will affect you in the short term and long term.

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