With a secondary market annuity, an annuity owner can use the secondary market to create 澳洲幸运5开奖号码历史查询:liquidity from an asset that usually is anything but. In this article, we’ll take you through three different scenarios in which a secondary market annuity might prove useful.

Scenario 1

Nia takes an early retirement offer from her employer. She uses part of her severance package to buy a 10-year, guaranteed payout immediate annuity. The annuity’s monthly checks would cover her 澳洲幸运5开奖号码历史查询:fixed expenses, such as a mortgage, property taxes, and health insurance. After a decade the payments would stop. However, by then Nia could start receiving 澳洲幸运5开奖号码历史查询:Social Security benefits and pensio🐬n income, which would make up for the loss.

Like clockwork, every month the insurance company deposits a check into Nia’s bank account. But after one year, Nia grows bored with retirement. She finds a job that pays more than what she had made at her previous employer. Now she no longer needs the annuity income. Worse, as a portion of that payout is taxable, it's pushing her into a higher tax bracket—a problem she didn’t have prior to taking the new job.

Fortunately, a friend tells her about companies that buy annuities from people just like her. She calls the firm, and a representative explains how firms in the secondary market buy annuities, then repackage them into 澳洲幸运5开奖号码历史查询:securities and sell them to 澳洲幸运5开奖号码历史查询:institutional investors. The price they would 🎶offer Nia for her annuity would depend on four factors.

• The total amount that remained to be paid out
• The time over which that payout will be made
• The current prevailing interest rate
• The annuity company’s financial strength

With the expert’s help, Nia receives three bids for her annuity. She accepts one and received a check within four weeks. Nia then invests the money in a 澳洲幸运5开奖号码历史查询:tax-efficient index 澳洲幸运5开奖号码历史查询:mutual fund. Her account will have the potential to track the underlying index, plus she has reduced her tax bill and can use the fund to supplement he💦r income in the future.

Scenario 2

Hakeem bought a 澳洲幸运5开奖号码历史查询:tax-deferred annuity three years ago with a windfall profit he made on a 澳洲幸运5开奖号码历史查询:real estate sale. He figured he wouldn’t have to touch the annuity for at ♌least 15 years when he planned to retire.

Hakeem’s son owns a high-tech business and could use some additional cash for a new product he wants to introduce. Hakeem decides to get out of his annuity to invest the proceeds in his son’s company. He asks the annuity company how much it would give him for his annuity, but finds that after paying 澳洲幸运5开奖号码历史查询:surrender charges, he’d end up with less than he invested.

Then Hakeem’s insurance agent te♎lls him about the secondary market for annuities. He decides to move forward with this option, ending up with 15% more than the annuity company had offered. Th🐭anks to the secondary market, Hakeem is able to change the long-term plan he originally had for his money and invest in his son’s business.

Scenario 3

Pam’s father recently died. He left he🌄r the remaining 11 years worth of payments from a 15-year annuity. Pam wants to take the funds as a lump sum to help pay her son’s college tuition, w🅠hich is due in two months.

The annuity company isn’t inte𒉰rested in buying the annuity. However, after taking a discount based on prevailing interest rates, a secondary-market firm offers Pam a lump sum for the r💜emaining 11 annual payments. This gives Pam the money she otherwise would not have had to pay her son’s tuition bill.

Caution: Not All Annuities Qualify

Just because you own an annuity doesn’t mean you can always convert it into cash. Annuities that are in a tax-qualified retirement plan are ineligible, as are 澳洲幸运5开奖号码历史查询:straight life annuities.

Steps to Take Before Selling Your Annuity

Before selling your annuity oꦜn the secondarღy market, take these four steps.

1. Contact the company that sold you the annuity. As the industry continues to add more options, you might discover that your annuity has a payout feature you never knew about.
2. Contact your financial advisor or insurance agent. They should be able to explain your options and help you get the best offer on the secondary market.
3. Think about how much cash you need. You might only have to sell off a portion of your annuity. Then you could let the balance grow tax-deferred or even delay the payments.
4. Find out how much you will owe in income taxes if you sell your annuity. Don’t wait until you get the check in hand. By then it’s too late, and you might end up sending a big chunk of what you just received to Uncle Sam.

The Bottom Line

Things change, and you may no longer need that annuitized guaranteed income you had so thoughtfully set up for yourself. All is not lost, however. Tapping into the secondary annuity market is one method fo🌞r you to sell your annuity at not too bad a loss (at the least) and exchange it for cash.