Sometimes situations alter; what you believed you needed - now you do not. This is true as individuals transition from working to retirement. One investment decision that may seem to be impossible - or at least pricey - to get out of, is an annuity. Once those guaranteed payments begin it seems you can't get your investment back. What once looked like a safe source of retirement income no longer fits your scenario. Even when you're in the accumulation stage with a tax-deferred annuity, you could pay serious surrender costs to obtain your cash back. Is there a different option?
Yes! You can sell your annuity - if it's the right kind - in what's known as a 'secondary market for annuities'. In this secondary market, firms purchase existing annuities. Then, they repackage them into securities to sell them to institutional investors.
These firms provide their 'bids' to buy your annuity. A bid's price is dependent on the:
• Total amount nonetheless to be paid out of your annuity,
• Period of time for that payout to occur,
• Present prevailing rate of interest, and
• Annuity company's economic strength, and naturally
• Bidder's revenue margin sought in the transaction
You must carefully think about whether such a purchase helps you both long-term as well as short term and if it will get you much more retirement income, if that's your goal.
You may not sell 'qualified' annuities - those in an Individual retirement account or other retirement account due to the tax implications. Only non-qualified annuities may be sold for cash.
Before you attempt to sell your annuity on the secondary market, be sure to get in touch with the organization that sold you your annuity. It might have a payout feature acceptable to you that is not component of the agreement. Additionally, discover how much tax the sale will trigger to determine if it is worth selling (bring your latest statement to your accountant). Lastly, your cash or retirement income needs might be satisfied by marketing just part of your annuity, that you can do.
An instance that may trigger a retiree to cash in his immediate annuity is if he finds himself a working opportunity which will create a significant retirement income - beyond what he expected. The annuity payout just pushes him into higher income tax bracket that undermines its worth to him. An additional would be a windfall (e.g. an inheritance) of some sort that can effortlessly replace the objective of the annuity he has.
Note: the sale of an annuity could incur costs and commissions and could be a taxable event taxed as normal income and that this kind of proceeds reinvested might not necessarily generate much more retirement income.
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