Is It In Your Best Interest To Sell Annuity?

There are times it can be in your best interest to sell your annuity and sometimes it is not in your best interest to sell your annuity. One thing you will want to do is “Homework”. You will want to make this decision based on information, which will help you make the right choice for your situation. Deciding to sell without information is not a smart move on your part.

Sometimes it is best to seek the advice of a professional. The qualified professional will use his expertise of the financial world and give you an unbiased opinion based on your situation.

You need to be aware, if you pay out date is 20 years from now no one is going to give you a large dollar amount and wait 20 years for their investment return. If you have not already received your structured settlement, you might want think about the reason you want a lump sum of money. You may want to make sure it is a definite need rather than a frivolous whim. Sometimes huge financial mistakes can be made this way.

If your annuity can make more of an investment somewhere else, selling your annuity is not a bad idea. If you have an equity-index annuity, it could be best utilized invested in a different place. However, keep in mind the insurance company is guaranteeing you a minimum return on your investment in an equity-indexed annuity.

If you have made the decision to sell your annuity, you will want to look at the bottom line and decide how much will you get for your annuity? If you don’t get the amount you expected, then how low will you sell your annuity for?

You and you alone will be making the decision regarding your annuity and your financial future. Make sure you weight the risks and take responsibility to either sell or not to sell on your own shoulders.

Getting Cash For Your Annuity Payments

You can sell your annuity or structured settlement for cash to a private note investor or lending institution. You will not be doing this without risk. This is the reason it is so important for you to understand the workings of this type of business deal, and it is even more important for your examine the company you are planning to make your sale to.

Acquiring cash for annuity payments is a more complex process than you realize, which means it will require the assistance of an annuity specialist or a structured settlement specialist. This person might be an attorney or a professional who has received training in the field of annuities. You will begin the process by contacting the insurance company who prepared your annuity or structure settlement contract or you may choose to work with a different individual, but you will need the help of a professional.

As you sell your annuity payments to a private investor or financial institution, you hand over to them the rights to your future payments in exchange for a lump sum. Annuity payments can be sold as a whole or just a portion. For example, if your annuity provides payments for twenty years, you have the option to sell one year to twenty years of payments. If you choose to sell them two years, you will not receive payments for those two years, but you will receive the remaining 18 years of payments.

One of the first steps to acquiring the cash for your annuity payments demands you to decide how much money you will need in to have. Many people choose to sell their annuity payments to pay off debt, medical expenses or college tuition. Others want their cash to make an investment or for the purchase of stocks, bonds, mutual funds, or even real estate. With today’s housing market, they are not looking to buy a house, but instead to purchase land.

The second step involves gathering the details of your annuity payments. The investor or financial institution will must have the name of the insurance company backing the annuity payments as well as the details of the annuity such as the dates, amounts of each payment and the number of payments.

The investor will also need to know the amount of money you are asking for and the number of payments you wish to sell. The information requested by the buyer will help him or her to evaluate the current value of your annuity.

After reviewing the information the investor will call you to inquire about payment options. Private investors who specialize in annuities do not purchase the annuity themselves they will contact a number of annuity buyers on your behalf. Then the investor will first contact you will the highest offer of one of the buyers and then they will coordinate the connection between you and the buyer.

The preliminary consultation will take around thirty minutes of your time. You want to feel at ease with the investor, if not do not do business with him or her. If you do, then take the time to ask questions and obtain references. It is important you contact the referrals and conduct a reasonable amount of time researching the company. You should also check with the Better Business Bureau to see if there are any unresolved complaints against this company. If you can, it is a good idea to find out about any pending lawsuits.

Once a buyer has been located for you annuity payments you will receive documents, which will require you to sign them and have your signature notarized. This part of the process will take any where from 3 to 10 business days as required by state law.

Once the documents have been signed they are then sent to a factoring company who assists with the underwriting process. Once the underwriting process has been completed, the papers then must receive the approval of the judge, who authorizes the transfer of payments. It is important for you to have a very convincing reason for selling your annuity payments for cash. Many judges are reluctant to allow the sell of annuity payments for cash unless the annuity owner can show just cause.

Before attempting to sell your annuity payments for cash, do a thorough examination of several different note-buying companies. Speak to several consultants prior to making a decision on a company. This will go a long way in ensuring you are dealing with an honest company and your experience with the sale of your annuity payments much more pleasant.

Exit Strategies for Annuities

When you are trying to sell your stocks, bonds, or mutual funds you will find it is easy, but selling your annuities are another story. If you have a tax-deferred annuity, you will have to pay surrender charges to cash out. At one time, if you were already receiving payments from your annuity, you were stuck with it until it paid out. That is no longer the case. An emerging secondary market for annuities is giving investors the opportunity to sell their annuities for more money than the insurer would give you.

If you are looking to sell your annuity, you might find these transactions appealing. An American Council of Life Insurer survey questioned 460 annuity holders. 27% of them said they were afraid they would not be able to sell their annuities, if they needed money for something else.

J.G. Wentworth, Peachtree Settlement Fund and a handful of others are incorporating into their usual business of buying structured settlements, the buying annuities. With this new market, not every policy can be turned into cash. There are annuities, which are in tax-qualified retirement accounts are not sellable because the Internal Revenue Service will not allow the ownership of these annuities to be transferred. Another ineligible for sale annuity is the immediate annuities. The payout of this annuity is not guaranteed.

The price you get for the sale of your annuity is based on the entire dollar amount, which is to be distributed, the amount of time the payments will be made, and the current level of interest rates. The other factors to be considered are the financial strength rating of the insurance company along with the terms and conditions of the contract, such as a death benefit.

Another unusual way to sell your annuity would be to transfer the current annuity to another annuity, which will make you larger payments and the amount of time you will receive those payments will be shorter. You may have to pay larger fees for the new annuity, but you may fair better with the end results. You can also use your annuity as collateral on a loan.

If your reason for selling your annuity is to receive a large sum of money to get you through a financial situation, you may want to try and get a loan before you try to sell your annuity, or you may have an annuity you are unable to sell because of the type of annuity you have.

Exchanging an Annuity

Many times when you have a life insurance policy or an annuity contract, you will be approached to exchange your old one for a new model. The new model will have better or the latest features. The exchange is tax-free, the new contract may even sound better, but you could lose instead of gaining by making the exchange.

You are aware of the three different types of annuities, the fixed, the variable and the equity-indexed. Just to give you a quick run down, fixed refers to the earnings and the insurance company guarantees the payouts. Variable refers to the amount of you will gain and be paid will vary with the stock, bond and money market funds you have chosen. Unlike the fixed, the variable annuities are registered with the SEC.

The SEC and the FINRA coordinate the sales of the variable annuities. The equity-indexed annuities have features like the fixed and the variable annuities. The returns will vary unlike the fixed, but less than the variable, and the equity-indexed annuity is a greater risk than the fixed but less than the variable and the potential return is less than on a variable annuity.

Variable annuities can have several fees forced on them when you invest in one. There could be “surrender charges”, which is paid when the money is withdrawn before the term; “mortality and expense risk charges”, which is charged by the insurance company for their risk under the contract; “administrative fees”, for the record keeping; ”underlying fund expenses”, which are related to investment options; and charges for “special feature”, such as a stepped-up death benefit or a guaranteed minimum benefit.

Should you decide to exchange your life insurance policy for a new model or if you choose to exchange an annuity for a new model annuity the Internal Revenue Service allows you to make the exchange without the penalty of income tax. However you are not able to receive a check and apply the proceeds to the purchase of a new insurance or annuity contract, and you are not able to exchange an annuity for a life insurance policy without the penalty of taxes.

There are any number of reasons why a person would want to exchange their existing variable annuity contract for a new contract. Many of the contracts now offer bonus credits toward the value of your contract by a certain percentage, which ranges from 1-5% for each payment you make. There have been new additions in recent years in the annuity features, more so in variable annuities, which are good reasons to consider an exchange. Investment options have been increased.

Some variable annuity contract are less expensive to get into have been created. Living and death benefits have been improved. With the growth of the stock market, many insurance contract holders have wanted to take part in that growth. These can be very good reasons for wanting to exchange one variable annuity to another.

Of course it is always good to look at the other side of the coin, so to speak. There will always be cons when there are pros. The exchange or replacement of insurance or annuity contract is not always a good idea, for the following reasons.

Many times of the insurance companies will add additional charges to you, which end up offsetting the bonus payments you will receive. Other contract requirements, like “surrender charges”, eventually expire with and existing contract. New charges will be charged with a new contract or may increase the length of time the “surrender charges” are needed. Other charges may include an annual fee on the new contract. The new features offered by the new contract may not give you any advantages. Your broker may end up making a higher commission for a variable annuity than on any other product.

If an exchange of your annuity contract will be in your best interest then you need to do the exchange. However, don’t make the mistake of making the exchange because the person trying to sell it to you talked you into it. With the drop in variable annuity sales, talking you into an exchange may be the only way the sales person can make a sale, so watch out for it.

The brokers or insurance agents recommending the exchange of an annuity contract are required to tell you all the pros and cons of the exchange. They are is permitted to recommend the exchange to you only if it is in your best interest and only if they have looked over your personal and financial position and needs. They also have to look out for your tolerance for risk, and the financial ability to pay for the new contract. Then they should point out all the necessary features you need to focus on as you are considering the exchange.

It is a requirement for the brokerage firms to have forms, which will replicate the customer admission of an exchange. The annuity owner and the salesperson must sign these forms, and the forms should provide a comparison of the features and costs of an existing contract to the new contract. It is a good idea if you look over these forms very closely.

With or without forms you will want to ask the total cost of the exchange. You will want to know if there will be any changes to the surrender period or other terms and will they affect me? Have the new features explained to you and why do you want or need those features. You will want to know if the features are worth the extra cost, and will you get paid a commission for the exchange and if so how much will it be.

Don’t sign any exchange form, agree to an exchange or purchase until you have had the opportunity to analyze all of the options carefully. Make sure all of your questions have been answered and you are sure the exchange is an improvement over the contract you have presently.

Selling an annuity or a structured settlement is not without risk, so you will need to be cautious. It also comes with a price there will be additional charges to pay not to mention the income taxes, which will have to be paid and if you are under 59 1 year old you will have an additional 10% tax penalty of early withdrawal.

Cashing Out Your Annuity

Saving money gives you a good feeling and watching it grow is even in some ways fun. It is amazing the way it makes you feel when you know you have a certain amount to fall back on. Just knowing it is there gives you a feeling of security.

Cashing out stocks, bonds, or mutual funds is easier than cashing out an annuity. At one time, if you were already receiving payments from your annuity you were not able to cash it out you were basically stuck with it. Laws have changed since then. Now it is possible for people to cash out their annuities in order to receive a lump sum.

However there are several good reasons to keep your annuities intact and not cash them out. You need to look at the dates of your payments closely. Just as an example, if you have an annuity, which will pay you $100,000 in 2015, you can bet you are not going to be able to get that amount of money when you cash it out now. If you try, you will be lucky to get one-quarter of the amount you would get after the payment date. If you haven’t had your annuity very long, it is not worth as much money as it will be later on in the future.

This is a serious consideration. When you cash your annuity out early, chances are good you will lose almost half of the amount you have in the account. You really need to ask yourself “is it worth losing that much money?” It is a good idea for you to look for the additional money you need in another source. Other than a major medical emergency or another crisis, it can be easy to sacrifice the short-term gain at the expense of long-term financial security. Just make sure what you are getting the money for is worth what you will lose.

When cashing out your annuity, you will want to make sure you read the fine print. Usually there will be charges when you cash out early you may not have planned on. If you are under the age of 59 1 you will pay an additional 10% tax penalty added with the normal amount of income tax you will have to pay because you received the money. Buying another annuity will not help you any because you have received the cash in your hands, so the taxes still stand.

You do have other options to cashing out your annuity early. You can exchange your annuity for an annuity with fewer payments, so the payments will be larger. With a Section 1035 Exchange you will not pay any taxes. However this does not work for the person with a need for a large sum of ready cash.

Many people have used their annuities to help them obtain a loan. This could be an option for the person with the cash flow problem. Another option could be to read your annuity contract especially the fine print, there may be waivers you will be able to take advantage of, which will eliminate the tax penalty. Some annuities will allow for withdrawals in the case of a serious illness or other situations. Take to the insurance company with whom you have the annuity. They may be able to help you come up with solutions to your problem. It never hurts to ask.

Annuity vs. IRA

To many people an annuity must sound just like an IRA, but with only maybe a couple of differences. They may be right, but before we make that assumption let’s look at them both to find all the differences.

If you are a retirement investor traditional IRAs and annuities offer similar advantages, which include tax-deferral on any earnings until withdrawal. Both IRAs and annuities also have the same 10% tax penalty for early withdrawal before the age of 59 1. With the traditional IRA and the annuity you must pay taxes on all payments received and on any money withdrawn. However each has different investment features making it appropriate for different types of investors.

The IRA has a contribution limit of $2,000 per person per year. The annuity allows an unlimited number of contributions.

With an IRA payments must begin by the age 70 1. With an annuity you can push the payment date back as far as you like.

Annuities offer a death benefit, which comes with an additional charge. The IRA does not.

With an IRA should you and your spouse die after only receiving a couple of payments the remainder of the balance in the IRA will pass on to your children.

With an annuity should you and your spouse die after only receiving a couple of payments, your children will not be able to get the remainder of the money, unless one of them has been named a beneficiary. When the beneficiary receives the money, taxes can be as high as 47% of the value in the annuity.

Now you have the differences between a traditional IRA and an annuity. There are really not many differences. This could help you choose where you would prefer to invest your money for your retirement years.

About the Time Value of Money

You will hear it on the news at least once a day; the value of the dollar is declining. It is the US dollar, which is used to give equities and commodities their value. Inflation and the declining economy, which may fear will turn into a recession the future value of money is shaky at best.

Gold might be the only investment worth hanging onto, because it has kept its value regardless of the financial situation of the United States and the rest of the world as well. The US dollar is one of the legal tenders used to give gold it’s worth. When the US dollar declines in value, the value of gold rises.

It is odd; the value of money can vary. It can appear strong one year and then loose its value in a few months. Smart investors are aware of the times we live in, when the dollar is decreasing in value along with those currencies of other countries. So they will consider alternative investments and they think in terms of the returns. The certainty of your future payments are loosing they’re worth now, what will their value be in the future when you actually see those payments.

So why hang on to them? It seems the smartest move would be to cash the future note in and reinvest it in an area, which is more stable. The declining housing market here in the United States is an area, which it would be safe to say, you will not be considering as a stable investment.

The president elections are fast upon us and the candidates are making promises, which will remedy the sick economy. Unfortunately that information may not make you feel any better. They don’t have a crystal ball any more than we do. At best they can try to fix the economy, but we, the American people are the ones controlling the spending of our money and we choose how our money will be invested. You are the one responsible for knowing the value of your investments and you are the one who should make an intelligent and educated decision about your investments.

At one time the Feds didn’t print money in order to keep the economy a float. There was a joke during that time, the makers of Monopoly printed more money than the US treasury. Today however is not the case. The Feds are printing money to keep the economy from failing.

With the recession loaming largely over us, the little bit of cash we have today will decrease in value even more than it is. Regardless of what many people might think their annuities and structured settlements may not be increasing in value as time goes by. If you need advice regarding the current situation of the economy and your annuities value, you will need to talk to a financial expert