What You Need To Know To Sell Annuity Payments
For many people difficult times have forced them to turn to some of their investments and insurance for assistance in making their obligations. The unfortunate truth is that many are more willing to sell their future than downgrade their present to make ends meet. Sometimes the only way to get the money necessary to pay the bills is to sell annuity contracts and other structured settlement annuities. Let's talk about some of the implications of selling annuities and discuss the who, how, and why to do it.
Can You Sell Your Annuity Payments?
A couple of months ago a client came into the office with an interesting question. They asked, "Is there any way I can sell my annuity payments?" And while on the surface this is not a very difficult question to answer, it always causes some hesitation in response. The real question that you should be asking is "Even if I can sell annuity payments, should I?"
When times get tough one of the first things that people look to get rid of are their insurance products. Rather than worry about the unnecessary expenses that are really paying a toll on their finances, they focus on their "investment portfolio." Most people would be much better off selling their vehicles, cable television, club memberships, and other luxury items before they sell their retirement annuity contracts and auction off their future.
In the past you were told that once you purchase your annuity, that is it. You cannot sell it, nor do much of anything else with it. In recent years however, this has changed. A secondary market has opened up the ability of selling annuity payments. As with most markets, this secondary annuity market was established to meet the needs of those looking to sell annuity contracts. Sellers can place all or a portion of their annuity contracts up for sell and make arrangements for a lump sum of money in return for the payments.
For example, if you have an annuity that is paying out $5,000 per month, but you have determined that you do not need the entire portion for your monthly living expenses, you can sell a portion of that payment to an interested buyer. In exchange for this portion of your annuity payment, the buyer agrees to pay you a predetermined lump sum of cash (or other arrangement). This can allow you to use these funds for any number of different reasons, and continue to receive a percentage of the annuity payments for your living needs.
Who Can Sell Annuities?
There seems to be a bit of confusion over who can sell annuities. And the answer to this question depends entirely on what you are referring to by selling annuities. Generally speaking, there are two types of people that can sell their annuity contracts. The first group is the annuity owners that are willing to either surrender their contract or sell off the annuity payments they are receiving from the insurance company or structured settlement.
The second group of individuals that can sell annuity contracts are those that have a license to sell annuities. This license is generally intended for the sale of new annuity contracts, but can also be useful in other transactions. There are a number of different licenses associated with the sale of annuities, both on the insurance side of the spectrum and on the securities side of the financial spectrum.
To sell any type of annuity you must have an insurance license in the state in which you are selling the contract. Because these are insurance products, the regulators are careful to ensure that those responsible for the sale of these types of contracts are sufficiently trained and informed of their behavior.
If you are selling fixed annuities, the only license you need is the insurance license from your associated state. In the case of selling variable annuities however, you must also have some form of license to sell securities. Variable annuities function differently than other annuity products and have much of their performance tied to the financial markets. Performance of the contract is dependent upon the investment decisions made on the contract. The FINRA is very careful to regulate any type of securities related investment.
Before you purchase an annuity be sure that your investment advisor or insurance agent is properly licensed to sell annuities. This should be a good starting point to determine if you are buying a contract from a reputable source or not. The vast majority of times your advisor will be licensed however.
How To Sell Annuities – A Quick Annuity Selling Guide
If you have determined that you must sell your annuity, there are number of ways that you can approach the sale. There are actually a couple of different approaches to getting your money out of an annuity contract. This is by no means a comprehensive guide to pulling your money out of the account. In fact, it may benefit you greatly to meet with an experience financial advisor before taking any money out of your plan.
The first approach to taking money out of an annuity is through the insurance company itself. Each contract has a running account value or surrender value associated with the annuity. As the contract grows and your money remains with the insurance company for a longer period of time, this will typically continue to grow (unless you are taking out payments already).
In order to encourage people to remain in their annuity contracts and also to help cover some of the necessary expenses associated with annuities, insurance companies have integrated a surrender charge into their policies. This surrender charge can be quite steep depending on the product and the company offering it, and is often the root of the negative press that annuities often get.
Sometimes running the numbers can help you determine that surrendering your contract may actually be of greater value to you than trying to auction off the annuity payments. Some advisors have also helped their clients get out of poor performing annuity contracts and put them straight into another type of contract. There are certainly strategies that will allow for this type of transaction to be quite beneficial to the annuity owner. Many new annuity contracts will have a signing bonus if you move your annuity over to them. This can be used to offset all or a portion of the surrender charge.
The second approach to sell annuity contracts is by auctioning off the periodic payments on the secondary market. Buyer are willing to take advantage of your income stream if you are willing negotiate for it.
Oftentimes you will not have to sell the entire annuity payments in order to come to an agreement with a prospective buyer. Only a portion of your annuity payment can be used in exchange for a lump-sum payment from the buyer.
It is important that you work with someone familiar with this type of transaction before you get yourself into an unfavorable deal. You want to find someone that can make a fair analysis of what the annuity payments you are selling are worth. Whatever you do, you don't want to sell yourself short. You are already probably placing yourself in a handicapped position selling your annuity; make sure that you figure out how to get the very best return on your money.
Online there are a number of reputable companies that work with selling annuity contracts. Find one of these companies to assist your transaction and give you access to the marketplace. You want a company with a good reputation, strong customer service, and years of experience in the annuity business. Ensuring you work with reliable and capable people will help you get the best out of your circumstances.
Remember, if you are thinking of selling an annuity, check with a financial advisor before doing anything. They may be able to figure out an alternative to selling your annuity contract. But if circumstances are right for you to sale, take the time to get different bids on your payments and do the necessary research on whom you are selling the payments to. Be wary of trading your future for an immediate need.
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