The annuitization process is lengthy and provides the holder with a lot of security. So it begs the question, “Why would you ever want to sell your annuity?” The reasons are typically complicated and unanticipated. For those who don’t know, annuities are financial products that you save up over time. Monthly payments are put away, drawing interest, while you wait for some time in your life when you’ll need income. Then you stop paying into the annuity, and it starts to empty back into your bank account, acting just like income.
This acts as a measure of security for older people, those who are no longer working, or people who can’t earn enough money through the work they do. Annuities are great and can be set up by individuals themselves, or given as gifts by loved ones or other concerned parties. When a situation comes up that requires money fast, some people are forced to sell this valuable financial product. We’re going to deal with some of the pros and cons of doing this, as well as alternative solutions.
Pros of Selling Your Annuity:
- Convenience. It is much easier to live off of a lump sum than it is to live off of smaller payments issued regularly through an annuity or similar product. There are plenty of companies who want to buy your annuity, so you’ll have no difficulty selling it (providing the sale is legal. You have to have a good reason for selling, one which necessitates the sale or the result of which will benefit you greatly).
- Flexibility. Because annuity payments come into your life like income, you can only use the money a little at a time. This cuts out a lot of potential purposes for the money, purposes that you can consider once you have it all in one place at one time. Purposes like this include: buying a house, getting further education, paying down a big loan, etc.
Cons of Selling Your Annuity:
- You Lose Money. This is the give and take of the annuity selling process. Of course by gaining the financial convenience and flexibility, as described above, you’ll have to pay. And you pay by giving up some of the value of your annuity to the company that you’re selling it to. You and (hopefully) your financial professional will decide if the benefit of the cash is worth the loss of value that you incur.
The Pros and Cons of Selling Your Annuity – Alternatives:
You may have alternatives! If you own your home, a home equity loan may tithe you over to accomplish your goal without sacrificing your annuity. Short of that, there may be other loans available to you through your bank or even micro-lending institutions. But if there are no good terms available to you, the only option remaining may be the sale of your annuity. While no one wants to sell an annuity, the sale can give you all kinds of options that an annuity doesn’t. Go into the sale with care and consideration, but be confident if you feel that it is the right decision for you. For more advice on selling your annuity, look into your state’s laws about selling one.