Does your search history include “cash for structured settlement”? There are companies out there that buy structured settlements, and want to pay you a lump sum for your annuity. Should you go ahead and cash it out now? Not so fast. Take the time to look at the the question from all sides to find out what will work best for you in the long-term.
How Does an Annuity Work?
An annuity is a legal arrangement where a specific amount of money is paid out of an account for a certain number of years. Who uses an account of this nature? Insurance companies are fond of these settlements because it allows them to pay out a claim over a period of time instead of as a lump sum. This means that if you have an annuity, what is owed to you is being paid very slowly. Should you sell annuity payments?
Think of it this way: those future payments are your money. You just cannot spend it quite yet. That is where the trouble comes in for people in certain situations. Credit card debit; loan repayment; buying a new car, or a downpayment on a house are all common reasons to look into “cash for structured settlement.”
Stick With the Annuity or Go With a Lump Sum?
One reason to stick with an annuity is penalty fees. Because it is an account that is meant to last, there is typically a fee of 6 or 7% of the total remaining sum if it cashed out in the first seven years of being opened. The penalty fee is lowered after the first seven years. Annuities also have annual payments, sometimes as high as 3% of the remaining sum. These annual payments are mostly for insurance and investment management services.
A lump sum might seem like a better deal. It is a relatively large sum of money that can go towards expenses you have now. But remember that taxes apply to the payout amount, lowering the total sum received.
Can I Sell My Annuity?
When deciding which option is right for you, consider the total amount you are owed on your structured settlement. Then look at the price being offered now for your future money. If the money being offered now will not entirely fix your financial distress, going with “cash for structured settlement” may not be the best option.