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If you need money now for a down payment on a house or to quickly resolve a financial emergency, cash out your annuity or structured settlement payments now.
If you sell your structured settlement payments, you will not pay taxes. But selling the payment rights to an annuity, will incur taxes in any gains.Learn More
Growing interest rates have made annuities attractive investments, and if a financial need comes along, owners can always sell their payments.Learn More
Inflation slowly gnaws at your financial investments, but if you don't have an inflation-adjusted annuity, you can always sell payments for a lump sum.Learn More
How Much Will I Get?
While interest rates, demand, and inflation affect the amount of money you'll receive from selling your annuity payments, it also depends on whether you want to sell all your payments, several years of payments, or future annuity payments.
The amount you are likely to receive from selling your annuity depends on the demand there is for those payments. Fluctuating interest rates will also tip the scales on the total amount you receive.
You can sell the entirety of your annuity payments for a lump sum, but that means you'll exhaust its future income potential. If you sell a portion of them or future payments for a lump-sum payment, then you'll keep a steady stream of payments for the remainder of the contract, while having some cash in hand.
Time Value & Inflation
If you invest $1,000 at 5 percent interest, compounded over 10 years, it will grow to $1,628.91. But if that same amount were sent to you a decade from now as part of your structured settlement, it would still only be worth $1,000 because of inflation and time value of the investment.
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Why Don't I Receive Full Value?
Since annuities are long-term investments, they will not provide you the money outlined in your policy until they mature, and that could be years from now. Why not tap into some of those funds now by selling the rights to your annuity while it's worth what you invested?
Purchase Not Trade
For us to remain a viable structured settlement buyer, we must generate a small profit on each agreement we sign with our clients. You'll encounter a similar scenario with traditional lenders or financial institutions like banks. It's the cost of doing business.
Cash In Hand vs. Future Payout
Money available now is worth much more than its future value because it has abetter earning capacity if invested and given the chance to earn interest in the present. Inflation and other factors reduce the future value of that investment.
Do I Have to Pay Taxes?
While the money in an annuity grows tax-deferred, you must pay taxes on it when you decide to sell. When you take money out of your annuity, the IRS considers it earnings, and you'll be taxed as ordinary income.
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It's the increase in value of materials, goods or services without a corresponding increase in the value of currency. If you purchased an annuity in 2003 that guaranteed you $1,000 a month for life, it would probably cover rent and utilities. It might even provide enough leftover funds for groceries. Fast-forward 10 years and inflation hikes the cost of rent and utilities. You might still afford those goods, but you might not have enough to pay for groceries.
Time Value of Money
It's better to have money now than in the future, right? Sure. That's because money now can be invested, and allowed to grow. For example, if you invest $1,000 at 5 percent interest, compounded over 10 years, it will grow to $1,628.91. But if that same amount were sent to you a decade from now as part of your structured settlement, it would still only be worth $1,000.
Selling Entire 10-Year Annuity
Let's say you have 10 years of payments valued at $833 per month. Their total value would set you at $100,000 over the next 10 years. You're likely to get between $55,000 and $70,000 in cash for your annuity, assuming your annuity is scheduled to start paying you right now. If the annuity or structured settlement doesn't kick in with monthly payments for several years, the current cash value would be worth less – from $30,000 to $50,000.
Selling Monthly Payments Now and Again in the Future
Let's say you have that same annuity we mentioned before. You sell two years of payments (24 months valued at $833 a month) and then sell three more years of payments (36 months at $833 a month) a few years later. Even though you're selling about $20,000 total in payments, this can be a tougher sell. Depending on condition we might not want to buy two years of payments because the mandatory fees that come with the sale increase the interest rate. To help you get the cash you need, we could buy part of your monthly payments for 10 years - enough to get you to the $20,000 mark you want.
Selling a Future Lump-Sum Payment
How about selling one lump-sum payment of $50,000 that is due in five years. This one is a little tricky. Your offer will be between $22,000 and $32,000. That puts the current value of the annuity between 44 percent and 64 percent. It's important to note that it is dependent on market conditions, particularly interest rates and market demand for secondary transfers.