What is an annuity; what are the different types?
An annuity is a product used by insurance companies to make income payments to investors. Selling annuity payments is a retirement strategy for those who would like to receive a stable income source. Various factors including the length of the payment period determine the size of pay.
An annuity can either be deferred or immediate. A deferred annuity is whereby money is invested for a period till an investor retires and can make a withdrawal. For an immediate annuity, an investor starts receiving payments immediately after the first investment. The immediate annuity pays out money while the deferred annuity accumulates money. The deferred annuities can also be converted to immediate annuities when the investor desires to begin collecting payments. Depending on whether the annuity is a fixed sum or tied to the market’s overall performance, it may also be variable or fixed.
(Partial vs. entire annuity selling)
Partial sale – This is whereby a seller disposes of pending settlements and exchanges them for instant cash agreed upon after factoring a rate of discount. Also, the seller continues to receive periodic annuities from the portion not sold out of the settlement annuities. This way, an investor one can use the settlement annuities to settle his immediate cash requirements without entirely missing out on the advantages of periodic payments. Therefore, a partial sale enables one to receive as much money as you need at the moment but keep your payment stream.
Entire sale – In difficult financial situations, an investor may consider making the wholesale of his structured settlement annuity. This entails a complete transformation of the annuity into immediate cash as directed by the conditions and terms of the contract between the buyer and seller of the settlements. This option does not allow you to continue receiving periodic payments, unlike the partial sale.
How to Sell Annuity Payments
In case your annuity does not fit your requirements, you do not have to feel trapped. Selling annuity payments will enable you free up your cash and utilize that money for investing or other purposes.
The first step to sell annuity payments is getting in touch with Settle4Cash. They have a good understanding of the market and are likely to have the right contacts for this transaction type. In most cases, this is the company that initially sold the annuity to you. The professional takes you through the various options available. There is no fee charged for this consultation service. When selling an annuity, several options are available, including full purchase, lump sum and partial purchase. A partial purchase lets you sell some of your payments and ensures that you get the cash needed immediately even though you will continue getting annuity payments in future. A full purchase sells the annuity entirely thus enabling you to invest a huge sum all at once. A lump sum purchase allows one to sell a lump sum amount of the annuity without having to sell the whole thing.
Once you agree with the customer representative on the best suitable option for you; the necessary legal documents are then prepared and given for review. It is also advisable that one goes through them together with the attorney. There is need for the documentations and disclosures to be reviewed by a lawyer even though the process of selling annuities is quite straightforward,
Upon reading and understanding the document thoroughly, the documents are then signed before being returned to the annuity buyer. The lawyers file these documents with the court.
The annuity payment formula is used to calculate the value of periodic payments.
Reasons for selling an annuity
Life is full of changes, and financial needs may come up even before the annuity funds reach maturity. In such circumstances, selling annuity payments is an option that comes in handy. There are several reasons as to why one may want to sell an annuity. The most common ones include:
- To settle a medical bill
- To pay off a debt
- When there are other investing activities with higher returns
- Payment of college fees
- Purchasing a home
- Home repair
- Putting money for a business start-up or business investment
- To buy a vehicle
- In case of inherited annuities and one already has other savings
- Inability to afford the annuity fees
- Taking alternative routes in tax savings