Annuities

One way to think of an annuity is paying someone now to give you an allowance later for retirement.

People buy annuities for various reasons. Annuities are becoming increasingly attractive because so few employers offer old-fashioned, employer-funded pensions. Workers are looking at annuities and other options to create secure sources of income for retirement. Annuities are tax-deferred investments that provide investors incomes for the rest of their lives.

People buy annuities to create long-term income. Unlike other financial investments, annuities are sold, backed and maintained by insurance companies. Annuities are not a good option for short-term investments.

An annuity is a contract between an investor and an insurance company that requires the company to make regular payments to the annuity holder starting at a specified time. The investor doesn’t have to pay taxes on the accumulating interest until he or she receives the payments.

An annuity is a fixed sum of money paid to someone each year, typically for the rest of that person’s life. It is also a form of insurance or investment entitling the investor to a series of annual sums.

Once a common benefit, pensions funded by employers offered a guaranteed amount of income retirement. But the plans proved costly for companies under pressure to produce profits. Now it’s more common for private employers to offer 401(k) plans for retirement. Annuities are another option for retirement income.

There are many different types of annuities. They are classified by their terms. Terms can involve anything from when the annuity is paid to how it is purchased. Other terms include how long the payments last and whether it is shared with someone else.

One of the primary ways to classify different types of annuities is how payments to the annuity holder are calculated.

Life changes. Medical bills come out of nowhere. You need a new roof. Your old car won’t get you where you need to go anymore. Or, on the good side, you come into money and don’t need the regular annuity payments anymore. You’d rather just have access to your cash.

If you find yourself locked out of your money because it’s tied up in an annuity, there are options. If you need access to the money you have in an annuity, you can sell all or some of your future payments to a third party.

Going this route will save you surrender charges and fees that typically come with premature withdrawals. Annuity.org’s partners can help you get the best deal when selling your annuity.

There are any number of reasons you might find yourself wanting or needing to sell your annuity.

It is not uncommon for annuities to be shared or jointly owned between two parties. But just as they can be shared, annuities can also be split. This is a common option for couples going through a divorce, as they choose to split their remaining financial assets and marital property. Splitting an annuity is a complicated process that requires the original annuity contract to be split evenly into two new, identical contracts.

If splitting an annuity is not an ideal option for you, there is also the option of sell your annuity. In the event that you need cash now, you can sell a portion or all of your annuity payments for a lump sum of cash.

If you want to continue to receive at least some of your annuity payments, you can sell a portion while keeping the tax benefits on the remaining funds. One way to do this is to sell the payments for a portion of your contract. You can select how many years of payments you want to sell and then resume receiving annuity payments after that time passes.

Or you can sell the right to receive all the future payments, and walk away with a lump sum of money.

There are several steps to selling an annuity. It begins with getting a free quote from a purchasing company and comparing it with offers from other companies. Once you decide which offer to accept, you will receive, review and sign a contract. In most cases, the sale will have to be approved by a judge. The purchasing company will handle most of that. You should also be aware that the sale will likely have tax consequences.

You should know that the money you receive will be something less than the value of the payments. That’s because the companies that purchase annuity payments are in business to make money. A lot of factors govern how much you will be offered. But it could be anywhere from 50 to 80 percent of the value of the payments.

No matter how you choose to sell your annuity contract, the transaction does require court approval. It is also important to discuss all of your options with a financial advisor prior to making the decision to sell.