The final 21th post - What you should have learned?

There are no signs telling you when to sell your annuity. You and you alone have to make that decision. You will probably make that decision based on your financial situation at the time. Maybe it will be because you have decided you can make your money earn more than the backers of your annuity can.

Getting into the annuity was a major decision and so is getting out of one. Make your choice wisely. Your financial security in the future will depend largely on the choices you make. Whether or not you keep the annuity intact will depend totally on you. With these days and times you are the only you can depend on your future income. Gone are the days of employees staying with a large company long enough to retire and receiving a retirement for the remainder of their life. Now days you have to depend on yourself for your future financial income.

Annuities can be a good vehicle for someone to use in order to help secure their future, but annuities are not for everyone. Entrepreneurs of the world have defied odds and made their own fortunes. As many others will in the future. I am sure they probably didn’t have an annuity to guarantee their future security.

If you are one of those types of people and you have an idea that needs backing, your money will do a better job working for you than working for you and the backer of the annuity.

Life has funny ways of throwing us curves. You can have plenty of money so you start an annuity, then things change and the money in the annuity is not doing you any good sitting there if you need the roof of your house replaced because the tornado took it off and the insurance didn’t cover all the cost of replacing the roof. Future security will have to take a backseat to the current needs of the roof today.

Then let’s look at the price of a gallon of gas; the price is going up about every other week, and is raising the cost of everything transported by truck from one location to another. There is no guarantee the money you have in your annuity will even cover more than a couple of loaves of bread by the time you are eligible for the payments. Okay that was an over exaggeration but you understand what I am getting at. Your money is worth more today than it will be in the future, so what ever you can do today to make your money grow you will need to take advantage of it and hope it continues to make it grow.

If you are going to use your money to invest, you probably already know the housing market may not be the best choice for that right now. However land is a commodity, which is limited. When new roads and highways need to be built, you may want to own the land in the path of the highway or major road.

Times are changing and it is hard to predict how tomorrow will be. An annuity is a good idea for some people where it is not for others. So if you decide you are one of those people the annuity will not work for, then invest your money wisely and make it work for you. Secure your future the best way you can. I wish you the Best of Luck in your endeavors.

Tips On What Not To Do When Selling Your Annuity

When you are looking for a buyer for your annuity or structured settlement, you have to be attentive and sharp. You are trying to get the best price you can for your annuity, so here are some things you will want to avoid doing in order to accomplish that.

You don’t want to take the offer of the highest bidder. Some buyers will make that high offer in order to get you in a contract. Then they will start with the excuses as to why the offer is lower. Once you are in a contract with them and they have a funding source, it will be difficult for you to back out. If you can back out, you are going to be starting the process all over again. You will have wasted time you may not have, especially if you need the money quickly.

Never take the offer of a buyer who says you will have your money in two weeks. They can’t make that promise, which means if they will lie about that what else have they lied about. Also remember the closing time is set by the state laws of the state you live in as well as the state where the insurance company resides. It is possible for the closing to take as long as a couple of months. Plus in most cases papers have to be filed with the court. All transactions take time; have plenty of patience on hand with this type of transaction.

Remember you are not obligated to sell the entire annuity you can sell only a portion. It may be in your best interest to take only part of the annuity rather than the whole thing. You will leave money you can fall back on for another rainy day.

Never allow your emotions control your decisions. If you are desperate and emotional, you may end up with a deal, which will hurt you financially in the end. You will miss important details when you are emotional and desperate. We also have a tendency to really think things through when we are in such a state of mind. Once you have heard the offer, take a day or two to think about it.

Maybe try explaining it to a third party to see if it actually sounds as good as you think it does. If you can take the unsigned contract with you, all the better you will be able to let someone else read the fine print and you will have the opportunity to re-read it several times. You can read over the fine print better than when you are sitting in someone’s office and rushing through it in order to get it done.

Make sure you have thoroughly checked out the company and their reputation. You can call the attorney general, the Better Business Bureau, and even consumer affairs in the area they are in to ask about any pending lawsuits, unpaid disputes, or unresolved complaints. Make sure the company has a strong financial rating.

The last thing you want is a promise of a check you never receive and your annuity in the hands of someone other than yourself. So, don’t sign anything until you are sure you are dealing with a reputable purchaser.

The Good and The Bad About Annuities

As it is with anything in life, nothing is ever all good and nothing is ever all bad. It takes the two mingled together to give life its balance. With annuities it is not any different than anything else in life. There is some good things about annuities and there are bad things about annuities. So let’s look at the advantages of having an annuity are:

Since annuities are intended to add to one’s retirement financial security, all the money put into an annuity is tax-deferred. You will not pay taxes on the money in an annuity until you receive payments or you cash out early. If you have an annuity, which an insurance company paying you the settlement of a lawsuit, the payments you receive from the annuity, set up on your behalf is tax-free. The two different annuities should not be confused. There are more limitations with the structured settlement annuity than there is with the annuity you purchase for yourself.

The annuity you have purchased yourself will be an income to supplement your Social Security payments and the payment from your IRA.

Your annuity will increase the value of the original amount placed into through investment earnings.

Depending on the annuity you choose, you can have a say in how your money is invested. You can opt to take a risk or you can choose a safer route.

Depending on the annuity you have chosen and the contract, some annuities will allow you to withdraw money for specific emergencies without the 10% tax penalty for the early withdrawal.

With an annuity as an asset, a loan institution could more readily extend you a loan. Some people have used their annuities as collateral, but not all lending institutions will allow you to do that.

Should you decide you wish to cash out early without the penalty of the additional 10% tax you can only liquidate as much as you need and not the entire amount.

Annuities now offer death benefits.

You can choose when you want to receive payments from your annuity.

If at anytime you wish to change your annuity, the Internal Revenue Code Section 1035 Exchange will allow you to make the exchange without a tax penalty.

The disadvantages of an annuity are as follows:

You do not have instant access to the money in an annuity. To have instant access you must cash out the annuity at a significant loss to you.

Annuities are not a good way to leave your heirs a large sum of money. They will end up paying as much as 47% in taxes.

You are not able to exchange an annuity for a life insurance policy without the taxes being paid and depending on your age the 10% penalty tax could be levied.

You will not have the additional income should you out live your savings.

With an annuity, as I said, there is good and bad, however if you look at the total. There is more good than bad. It is understood an annuity will not work for everyone. If you are good at choosing investments, and you know how to minimize the commissions paid a broker, you may be able to increase your money better on your own. However, if you know absolutely nothing about stocks and investments, sometimes it is best when left in the hands of professionals.

If you have decided to purchase an annuity, you must have had a good reason at the time. Before you cash out an annuity make sure you have given the idea as much thought as you did when you bought the annuity. Buying annuities is not like buying a shirt and after you take it home if you don’t like it you can return it and get all of your money back. This is not the case with an annuity. So think long and hard before you buy one, and think even longer when you think you want to sell it.

Tips You Should Know Before You Sell Your Annuity Payments

When selling an annuity, you must take into consideration how the process works and what it entails. You will want to take certain steps to give you the best outcome. You don’t want to get blindsided by an unexpected turn of events. You don’t want to become impatient and start cutting corners either. Consider these tips before you sell your annuity to ensure you are ready and aware of what to expect.

You have a reason for selling your annuity, but you also want to make sure it makes good sense to sell the annuity. You maybe planning on reinvesting the money from the annuity or you might need it to get you through a financial crisis; whatever the reason is the important question is “have you made plans?”

Once the money has been used you will need to have a plan of action. Farther down the road there could be another financial crisis and of course your “golden years” are fast approaching. You need to have a plan, so just like the Boy Scouts, you will “Be Prepared”.

As you are looking for a company to buy your annuity, just remember not all companies are alike. There are good ones and there are the bad ones. You will want to make sure you avoid the bad ones. You might even run across some companies, which are unscrupulous and dishonest. If you can trust your instincts, trust them. If not, take someone with you whose instincts you do trust.

If something seems to be wrong, chances are it is wrong. Don’t be afraid of getting another quote and comparing companies against each other. You want to get the best deal possible for yourself. It is your money; you just want immediate access to it, and so keep as much of it you can. Always check with the Better Business Bureau if you are unsure about any company you might be dealing with.

Read the entire contract before you sign it, especially the hidden fees. You want to know about any hidden charges upfront. You don’t want to end up with less money than you thought you were going to get, because of lack of attention.

Ask questions about everything you don’t understand. You can even make them repeat step by step everything, as it will take place, just to make sure you have it down correctly in your mind. Make them clarify any details if only for your own piece of mind. It doesn’t hurt to make sure you have it all in writing. The company has more experience at doing these types of transaction, but you are a novice, so it is understandable for you to ask lots of questions. After all it is your money at stake.

Selling your annuity and receiving the check will probably take as long as a couple of months so don’t get impatient. You will need to keep in mind most insurance companies will not allow you to sell your annuity to a third party. The courts must get involved for the sale to take place. Paperwork must be filed with the courts before the sale of your annuity can go through.

Trying to rush or hurry through the process you may miss an important detail and it won’t get you anywhere. You are literally at the mercy of the courts and the length of time it takes for them to process your paperwork. If you need the money quickly, try and start early enough to get it done by the time you need it. Just be as patient as possible because there are procedures, which must be followed and cannot be hurried.

Variable Annuity vs Roth IRA

Of course it goes without saying the best time to invest money is when you have a extra money, which you could spend, but you don’t really have to or need to. This is when you need to think about investing the money and saving it for a rainy day or in many people’s case now days saving it for financial security during their retirement years. First you have to find a good place to put the money.

You want to save it, but you want it to earn money while it is sitting there. You have heard of making your money work for you, well this is definitely one of those times you want your money to increase. $5,000 won’t last very long in today’s time, but it is a good start for an investment savings fund. So where do you put it?

If you are considering long term investments, you will want to consider a variable annuity or a Roth IRA. So which one is better? We are going to look into the differences and the similarities between the Roth IRA and a variable annuity.

First thing you need to know is: Contributions to a Roth IRA and a variable annuity are not tax-deductible. However over time they both grow tax-deferred until the time of the withdrawal. Then the payments received from an annuity is taxed at a normal income tax rate, but the payments from a Roth IRA are not taxed, if the account is at least 5 years old and the owner is over 59 1. Law may change between now and the time you will withdraw.

The types of investment assets with both the IRA and the annuity are pretty much the same. Usually they will consist of stocks, bonds, money market investments and mutual funds. Mutual funds are the best investment for small investors with only about $2,000. They are professionally managed and provide a diversified investment packet, which is a lower risk.

Variable annuities offer a death benefit to a named beneficiary to avoid probate, however taxes are payable on any earnings. There is flexibility in a variable annuity while it is still in the accumulation period. Investments can be transferred without paying taxes, but a withdrawal still carries a tax penalty for a beneficiary less than 59 1

With a Roth IRA you can only invest if you have an income, which is below the threshold of $95,000 for singles and $150,000 if you are married. Contributions are limited to only $2,000 per person per year. With a traditional IRA you can do this even if you are making contributions to a pension plan. Roth IRAs are very flexible and withdrawals of the contributions can be made at any time, but not the earnings. There are no required withdrawals during retirement.

The flexibility of the Roth IRA to many people is a way to avoid the penalty tax for early withdrawal, which you have with the variable annuity. However this can be used to your disadvantage. You could find yourself making early withdrawals for good reasons and by the time you are old enough to need it, there is not enough left.

For every investment there will be a charge and benefits. Over time the benefits will more than outweigh the charges. There will be an annual charge with both types of accounts, but soon the benefits will outweigh them also.

The choice between a Roth IRA and a variable annuity will depend on the person who will be doing the saving. If you don’t trust yourself not to dip into your savings every now and then, you might want to opt for the variable annuity. The most important point here is to invest in your financial security in the future.

You Have Made The Decision To Sell

As it was said early, since you have made the decision to sell your annuity, it is a good idea to research your options in order for you to make good educated choices. Keep in mind, when you made the decision to purchase the annuity you thought about it long and hard, so the decision was made very carefully. Selling the annuity should not be any different, you should put a lot of thought into the decision you are making and make it very carefully, also.

You know annuities are known for providing a steady income and in most cases the income is a guaranteed income. Because that is such an important feature, you will want to consider whether or not you need that steady income. If you are planning on reinvest the money from the annuity, which could earn you a better return, then it is a good idea to sell your annuity. If you require the income provided by the annuity and you are not planning on reinvest the money, then it is not a good idea for you to sell your annuity.

Also there is always the possibility, when you purchased the annuity it was intended to make a large purchase, such as a new home or high dollar car, or even to start a business. Knowing this when you purchased your annuity, you made other arrangements towards your financial security during those retirement years, then by all means sell it, but you will still want to do some research to get the best price you can for your annuity.

To cash out your annuity, you will want to find out the options you have. This will take a phone call to your insurance company so they can tell you your options. Some of the annuities have a “surrender charge”, which will lower the cash value of the annuity because of the early withdrawal. In some cases in order to get the full value of the annuity the owner must receive 5 to 10 years of payments. If you have purchased an annuity by making an upfront payment to receive payments immediately, there is no cash buy out.

The insurance companies offer may not work for you. However it is still important to know the facts, because it will help you understand the costs and benefits when dealing with the secondary market.

You will want to contact a reputable buyer of annuities when you are looking to sell your annuity or even just to get a quote. They will review your policy for free in order to determine its fair market value in the secondary market or even through your insurance company or financial advisor. To receive this analysis you will be under no obligations, so basically “no strings attached”. You will want to work with a company who has the reputation of providing good service and good value to annuity owners whether you deal directly with the company or through your financial advisor.

The buyer should be prepared to explain in detail the nature of your policy and be willing to answer any questions without pressuring you to sell your annuity. When you are selling your annuity on the secondary market, it is important for you to understand you have options. When your insurance company tells you, you are unable to cash out your annuity or you must pay “surrender charges”, these are the types of situations the secondary market can be the most beneficial.

If you are receiving payments from your annuity, do you need part of the payment? Buyers will work with you, you not required to sell the entire annuity you can only sell a portion of it.

You will want to get some tax advice when you sell your annuity, since it can have some significant tax consequences. Fortunately many of the tax consequences are good ones, especially if the sale of the annuity is for the purpose of estate planning. Transferring wealth to your heirs is not considered to be part of estate planning. The majority of your annuity would end up going towards the paying of taxes.

However, if you sell your annuity and purchase stock, bonds and mutual funds, these can be passed on to your heirs income tax free until they choose to cash them. Your annuity could eventually amass a fortune, should your heirs choose to leave them intact for their heirs.

You may want to be careful - Your Annuity Can Be a Tax Bomb

Annuities are a good way of accumulating money by deferring the tax payments until sometime in the future. When you start drawing out the money from the annuity is when you will start paying taxes on those payments. If you receive the money in small amounts, the tax amount is smaller and easier to handle. However it goes without saying, if you are requesting the money in a large lump sum, or even a partial amount can be large enough to make you reel from the amount of the tax you are required to pay on the amount. This is a reason it is best not to sell your annuity and take the monthly payments for the term of the contract. It doesn’t lower the amount of taxes, which will be paid; it just makes it easier.

When the owner of the annuity expires, this is usually when the big surprise hits. If a loved one passes on and leaves an annuity to an heir, it is the only asset, which does not get passed on to the heir without taxes being charged as it can happen with other assets. So the entire sum of the value of the annuity will be taxed when the heir receives it.

There are large sums of money in annuities right now, which is designed to go to the children of the person who originally bought the annuity. When the tax bill comes, it will be a huge shock to all of those involved. It is not unusual to see tax-deferred money, which would have been subject to a fairly low income tax rate to earn taxes of 33% or more when passed on to an heir. The original owner had no intentions of the inheritance becoming a windfall for the IRS rather than the heir they wanted to receive the money. To prevent this you need to make different plans.

If you have a fairly large sum of money you want to pass on to your children or heirs, the alternative to an annuity is a special life insurance policy. It is designed for greatest cash growth, which will replicate the level of accumulation of annuity. People wanting to pass on their savings to their children at their death will like the after tax benefits will be much higher as long as the money was accumulated in the life insurance and not the annuity. The money will include the value of the account with an additional amount of life insurance benefit, which also paid to the beneficiary. This money is paid to your heirs income tax free. This is the best way to save money you want you heirs to receive after your death.

When people realize the benefits of the life insurance policy over the annuity, they may be looking to make a change. You are not able to change your annuity to a life insurance policy without the penalty of taxes. If you decide to make the change, sooner is better than later. The smaller the amount of money to be transferred the smaller the amount of taxes, which will be paid.

Once it is in the life insurance policy the growth will begin much like the growth of an annuity. By closing out the annuity and paying the taxes while the amount is still small when the remainder of the money is placed into the life insurance policy the amount of taxes paid plus will be earned.

There are several different ways you can look at this scenario, which will depend on your individual needs, your current health and additional personal factors. Provisions can be written into these policies to provide care prior to the death of the insured party, such as nursing home and convalescent care. The larger amount of the insurance policy will be available to the insured party to cover the cost of such care if needed. The remainder would go to the heirs at the time of the death of the insured party.