Everything You Should Know Before You Sell Your Annuity

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You might have an annuity from an inheritance, an insurance payout, or even from winning the lottery. While it’s nice to get a little extra money every year from your annuity, many times big life changes make your cash needs greater than the amount you get from your annual annuity payment. When this happens, it might be more beneficial to get all of your cash for an annuity now, rather than collecting small payments for years to come. If you have an annuity that you are considering selling, here are the answers to the questions you’re probably asking:

  • What is the benefit to selling my annuity?
    Many annuities require at least five years to mature; some take one or two decades to get your money out of them. You might need the cash for an annuity now because you are facing a big life change, such as buying a house, starting a business, getting married (or divorced), or having a child. It is also common to sell an annuity to eliminate debt– the average American has over $35,000 in school loans and often around 13 credit cards to make payments to every month, making your living expenses greater than your income. Selling your annuity to get yourself out of the black hole of debt so you can have a fresh start will give you financial peace and improves your quality of life.
  • How do I know if my annuity is eligible to be sold?
    To know if your annuity can be sold, you’ll want to research the Structured Settlement Protection Acts in the state your annuity is from. Every state except New Hampshire, Wisconsin, and District of Columbia have at least some laws regulating how an annuity can be sold. You will also want to research the terms of your annuity to make sure there is not a stipulation that prevents you from selling it before it matures.
  • Do I have to cash in the entire annuity if I decide to sell?
    You can choose to sell all of your future payments for a lump sum, part of your payments so that you get a large amount of cash for an annuity now but still reserve some payments in the future, or just restructure it so that you get larger scheduled payments instead of a bunch of small payments that you can’t do as much with.
  • How much money will I get when I sell my annuity?
    You should understand that selling your annuity is a business deal; companies who purchase annuities are doing it to make a profit. This means that if the entire value of your annuity is $100,000, the amount that you will be able to sell it for will be between 50% to 80% of that value. The amount you’ll be able to sell your annuity for depends on the number of payments you’re selling, the lifespan of the payments, the economic conditions, and the fees incurred through selling. Each company who purchases annuities has a different way of calculating their offer; you should get a quote from several companies so that you know your best options.

Have you ever sold an annuity? Do you have any tips for others who are planning to sell theirs? Please leave us a comment with your experience below!

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