Written By : Catherine J. Byerly
This page features 3 Cited Research Articles

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Financial needs constantly change. While investing in an annuity may have once been your best financial option, selling annuity payments may be the solution to sudden financial woes.

Surrendering Annuities vs. Selling Payments

While annuities are considered to be profitable investment tools to help save for larger expenses or a future retirement income, financial needs tend to change over time. When life throws you a curve ball, the idea of selling your annuity payments for cash may come to mind.

Pro Tip
Selling is the most well-known form of liquidating an annuity, but it’s also possible to withdraw funds and transfer payments.

Selling Annuity Payments

Selling your annuity payments involves forfeiting the rights of future annuity payments to an insurance company or annuity buyer. In return, you will receive a lump sum of cash. There are several ways to sell annuity payments, including: Entirety sale, in which an annuity owner sells all of their annuity contract for access to their investment in a lump sum. However, the annuity owner will not receive the total value of their initial investment because the issuing company will charge a discounted rate for quick access to their savings.

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Partial sale, in which annuity owners sell a portion of their investment for a lump sum of cash while still being able to receive guaranteed payments.

Selling annuity payments for cash comes with some drawbacks. Though this process does not require annuity owners to pay surrender charges or fees, they will not receive the full amount of their investment. In exchange for immediate access to funds, insurance companies will charge a discount rate influenced by the total amount of the annuity payments being sold, how many payments are being sold, and how soon the insurance companies will be able to profit from them. In many cases, owners will receive as much as 60 to 80 percent of their initial investment.

Find out how selling your future annuity payments can help you.

Surrendering Annuity Payments

Annuity owners can also surrender part of, or withdraw funds from, their annuity account. Though it is possible to choose a full surrender of your annuity contract, or withdrawing all funds from your account, not all annuity contracts offer an early withdrawal option. Annuitants can also choose a partial surrender option, allowing them to withdraw only a portion of their funds, and receive the remainder of their assets through their designated payout option.

Pro Tip
Surrendering your annuity bypasses having to sell portions or all of your annuity account, but does come with tax liabilities and penalties.

Some annuity contracts include surrender charges, or fees associated with premature withdrawals within the first five to seven years of the contract. In essence, the longer you wait to withdraw from your account, the less fees you will be required to pay. If funds are withdrawn before the end of the surrender period, insurance companies will charge a 7 – 15 percent penalty fee on the withdrawn assets. In addition, if an annuitant withdraws assets before reaching the age of 59 ½ years old, they will be subject to paying a 10 percent IRS penalty on the amount taken out.

Annuity Transfers

Some annuitants choose to liquidate their annuity account in order to transfer funds to another account. This may be the case if they want to upgrade their annuity to better suit their financial needs and lifestyle changes. In an annuity transfer, some issuing companies may reimburse some or all of the surrender fees for investing in their accounts.

Selling Lottery and Casino Winnings

If you’re lucky enough to win the lottery or a significant sum of money gambling in casinos, you may have purchased an annuity to disburse your winnings over a long period of time. Similar to retirement and investment annuities, it is possible to sell casino winnings and lottery payments. Though periodic payments can guarantee a steady income stream over time, you may need a lump sum of your winnings for unexpected expenses and debt.

Lottery and casino winners can sell all of their winnings in exchange for a lump sum, an option that provides the most flexibility and access to funds. Selling an entire lottery or casino annuity can help to pay for medical expenses or school tuition or can be used as a home payment. However, if winners want to receive periodic payments but require a large sum of money for an unexpected financial emergency, they can choose a partial sale option. Selling a portion of winnings provides access to immediate cash but still disburses the remaining winnings through periodic payments.

Twenty-eight states allow the sale of casino and lottery winnings.

Prior to making the decision to sell, winners must first ensure that their winnings can be sold. Casino winnings sometimes do not require outside approval from the court or issuing casino in order to be sold. Lottery winnings, on the other hand, require court approval for sale or transfer to ensure the transaction is in the best interest of the winner.

Selling a Retirement Annuity or Pension

An annuity may have once been a financial option to help secure your nest egg, but the golden years may bring with them medical costs for procedures or surgeries or other debt. In order to alleviate financial strain in retirement years or secure your family’s future, you may choose to sell your retirement annuity or pension.

Pro Tip
The two primary payout options from selling a retirement annuity include a lump sum payment or a partial sale.

Selling all payments from a retirement account can provide a one-time lump sum payment. While this payout allows an annuity owner to pay for bigger expenses or indulge in a long-awaited vacation, it eliminates the option of receiving a stream of consistent payments. On the other hand, if the annuitant wants to contribute toward a down payment on a new home, they can sell a portion of their retirement annuity in exchange for a lump sum payment. This option also allows them to maintain the initial terms of their annuity contract, receiving periodic payments until the end of the annuity term or until death.

Due to state and federal regulations, some retirement accounts are not eligible for sale including:
  • Veterans’ benefits
  • Social Security benefits
  • 401(k) or pension benefits
  • IRA accounts
  • Worker’s compensation payments
Last Modified: December 19, 2019

3 Cited Research Articles

  1. 123 Lump Sum. (2015, July 21). The Critical Difference Between Surrendering And Selling An Annuity. Retrieved from http://123lumpsum.com/blog/structured-settlements/the-critical-difference-between-surrendering-and-selling-an-annuity/
  2. Csiszar, J. (n.d.). How to Avoid Paying Annuity Surrender Charges. Retrieved from https://budgeting.thenest.com/avoid-paying-annuity-surrender-charges-24707.html
  3. Sell My Annuity Guide. (n.d.). Selling an Annuity vs. Surrendering an Annuity. Retrieved from http://sellmyannuityguide.com/annuities/selling-an-annuity-vs-surrendering-an-annuity/