If you’re trying to decide whether or not to sell annuity payments and get your cash upfront rather than waiting for it (or waiting for 10 to 20 years for all the payments to trickle in), it can be a tough decision to make unless you understand exactly how an annuity is beneficial, how it’s not beneficial, and why exactly people choose to receive payments as annuity settlements and then sell those annuity payments in return for cash:
- Why do people have annuities? Annuities may be given out as a result of a lawsuit (often these are called structured settlement annuity payments), as a lottery annuity, or the payments have been purchased from an independent company that provides annuities as investments and as retirement plan alternatives. For structured settlements and lottery payments, you have to choose to receive your money either in one lump sum or in a series of annuity payments.
- What are the benefits of annuities? For retirement and investing, many people see annuities as financial security — especially when it’s uncertain whether traditional retirement plans will last. Another benefit of annuities is that, compared to a lump sum for lottery payments, annuities aren’t taxed as much (at least, not upfront). For people who aren’t great with budgeting, receiving a big payment in the form of multiple smaller payments may reduce overspending.
- What are the weaknesses of annuities? Many people choose to sell annuity payments and get cash for settlements or as a lump sum lottery payout because of financial emergencies that require more cash than what their small payments provide; other people simply want to invest their own money in a more lucrative industry, make a big purchase (like a house or a car), start a business, or go back to school. By selling a structured settlement or annuity, you’ll have full control of your money without paying early withdrawal fees, which can get as high as 10% in some cases.
Bonus Question! Should you think about selling your annuity payments? Ultimately, if you want to sell annuity payments and get cash now, you probably already have at least one good reason why you need or want control of your money. Selling your annuity might just be the perfect choice for you!