People who want to sell their annuity payment for cash in 2015 have a lot more options than they did just 10 short years ago. Imagine you received an annuity payment years ago that seemed reasonable at the time–and might have been. Then imagine that you’ve had a family emergency, a change in your job status, or some other dramatic life changes, and you need money quick.
When this happens, people don’t have to sit on slow paying fixed annuity payments while they’re drowning in debt. Instead, a person with assets has the ability to help their family by cashing out and taking a lump sum payment. People are willing to invest in annuity contracts, so you can sell your annuities for a lump sum of cash and even have buyers compete for the right to own their annuity.
Why Sell Annuities?
Selling annuities might make sense for you as the seller, but also those buying your fixed payments. I’ll give several likely scenarios, just as an example.
- Imagine you have a child about to go to college. You spent most of their childhood driving them to soccer or baseball games. They’re a really good athlete and you expected they were a cinch for a sports scholarship. Then they tear up their knee just prior to their senior year and you’re footing the bill for university. Suddenly, you need to either take out a student loan or sell your annuity payments for cash.
- I have a friend whose daughter was 2nd in her class and their family expected this would net a number of academic scholarships. The downturn in the economy meant that many scholarship programs have been cut back, so my buddy suddenly has a daughter in college and is scrambling to pay for the costs. In either case, a parent suddenly might need to pay a whole lot more for their college education than before.
- An even more common reason to sell your annuity payments is that your spouse has maxed out your credit cards and you suddenly need a lot of money fast in order to pay off an unwanted and unexpected credit card debt.
These are just three examples, but who knows what might happen?
You might have lost your job or your position at your job. That mortgage which seemed so reasonable a few years ago suddenly is completely unrealistic compared to your current financial status. Whatever the case is, you might need to turn those fixed payments into a lump sum amount.
There’s a reason so many people select the cashout option when playing the lottery, because they’d rather have less money up-front than more money in an annuity. The next time you’re in the convenience store and the person in front of you is buying up lottery tickets, notice what they say when asked whether they want the cash or annuity option. It’s almost always “cash”.
Most people wanting to sell annuity payments in 2012 know what an annuity is, but since you’ll find your occasional potential investor who isn’t totally familiar with every aspect of investing, someone out there might be wondering what an annuity is.
What Is an Annuity?
An annuity is an investment opportunity where you either pay in one lump sump or sign a contract stipulating you’ll pay in a certain fixed amount over time.
At some time late down the road, you receive annuity payments at regular intervals. The money meanwhile sits in a combination of stocks and bonds. It’s presumed the annuity fund makes money over time, so everyone should be happy. The annuity, whether a fixed annuity or a variable annuity, is often used as a retirement investment.
One advantage of the annuity is that it defers taxes. A disadvantage is you pay in now and might never see all the money you pay in, if you die too soon after the annuity starts paying. Also, a fixed annuity offers slow growth, though a steady payment. If emergencies come up and you have your money locked up in annuity payments, this money could be useless to you in a crisis.
Have you ever seen the movies where a rich man is being held up by robbers, terrorists, or other ne’er-do-wells? The wealthy man always says, “My assets aren’t liquid. I have the money in investments.” While I assume the rich guy is probably talking about leveraging companies and big stock portfolios, the fixed annuity payments also work on the same principle. You don’t have all your wealth sitting in a bank somewhere, so when a crisis hits and you need cash quick, you might not be able to access all your wealth. That’s when it’s time to sell your annuity payments.
Online Annuity Payment Sales
These days, the Internet makes selling your annuity payment so much easier than it was a generation ago. You can go on a site, provide their analysts the basic details of your annuity payment, and have the experts quote you a price. If the price sounds like it’s in the ballpark of what you need, then you’ll be able to post your annuity payments up for auction.
The auction scares some people away, because this might drive the price much higher or it might not net you as much as you’d hope. Having a competitive bid-off tends to increase the price of a commodity, which is exactly what an annuity is. Buyers want the price as low as possible, since they want to make a profit. The auction adds in other potential buyers, which keeps them honest. If you aren’t used to negotiating annuity-for-lump-sum deals, then you probably don’t want to be negotiating with a professional. Instead, you put the annuity payment up for bid and let the process handle the rest.
Most online annuity payment sales are going to take 6 to 8 weeks, but that’s a good thing. You want as many people to know about your annuity payment sale as possible, because that’s going to draw in more interested buyers. Sellers certainly don’t want to rush their annuity through the process or else you’re likely to receive lower offers.