If I Need Emergency Cash, Is It Better To Sell Part of My Annuity?
Selling part, or if needed, all your annuity and getting a lump sum can be viable and good options for managing your debts or getting emergency cash for a home down payment, medical emergencies, or more.
As the annuity owner, either transaction will allow you to liquidate a portion of your contract but still retain the rights to future payments.
If you require a smaller, specific amount of cash, you may be able to withdraw funds from your annuity; however, this type of transaction can come with expensive fees and other harsh financial penalties. This is the main reason that you may choose to sell a portion of rights to future payments instead,
Unless the financial situation demands it, you shouldn’t have to sell your entire annuity to get the immediate extra cash you need. Therefore, before you decide to take a single, large payment, obtain professional, experienced advice on the costs of selling a portion of those funds.
By consulting with an experienced, knowledgeable funding company, you can obtain all the advice you require and be told exactly how the two options compare. You can receive all the costs associated with selling all or part of your annuity and then know what is best for your unique financial situation.
What Are The Ways I Can Get Emergency Cash From My Annuity?
Straight out withdrawing funds from your annuity is commonly the most expensive and intrusive way to obtain the funds you need. This is why, when you need extra cash, most annuity holders opt to sell either a part (or a specific number of future payments) or all of their annuity. Of course, this type of transaction usually depends on the size of your annuity and the amount of cash you require.
Essentially, there are two ways to sell part of your annuity: a partial or a lump-sum sale. These options provide you with the financial flexibility you need, and you can “tailor” the transaction to adequately meet your current cash needs.
In most partial sales, you can sell your rights to a specific number of future payments or sell the payments themselves for a certain period. The type of annuity you have will decide what you can do. So, this decision will commonly depend on how many payments you’ve already gotten, what payments you wish to sell, and when the disbursement period ends.
Let’s say, for example, that your annuity pays you $4000 per month. However, you also receive a lump sum payment of $20,000 for the next 15 years every year. You wish to purchase a home and need a downpayment. So, you work with your annuity funding company and sell the next five years of yearly payments.
Your specific annuity, financial situation, and cash needs will be unique. Still, your experienced funding company, with a long history in the business, will provide you with all the various options to choose from and their associated costs. You then can decide precisely what method of receiving the cash you need works best for you and your family.
What Is A “Lump Sum” Sale Regarding My Annuity?
First, it’s important to note that the term “lump sum” commonly refers to the single cash payment you’ll get if you sell your payments in a partial sale. You shouldn’t confuse this with a lump-sum deal. A “lump-sum” sale provides a single payment in exchange for a deduction from future payments. This may sound confusing and may be, but your thorough funding company will thoroughly explain the differences and details.
The main difference between a partial and a lump-sum sale is your ability (and financial flexibility) to specify the exact amount you want to receive from your annuity.
A lump sum allows you to receive a specific amount of money, say $75,000, instead of a specific number of payments that might be more or less than the exact amount you need. By working with your flexible and transparent funding company, you can customize how this money is deducted from your specific annuity payouts.
Let’s say you need $65,000 to pay off a mortgage. Depending on your funding companies’ fees, etc., you must sell $68,000 of your annuity.
By thoroughly discussing all your options with the funding company, you can tailor the sale to meet your exact needs. If you use your annuity for extra cash now, you must note that selling only what you must is always preferable.
Do I Always Have the Option To Sell all or Part Of My Annuity?
The answer to this question is yes, you can.
By working with an experienced, well-known, and reputable funding company, you must always have the right to sell all or part of your annuity payments for cash. Many times in life, your financial position changes, and you might find that having an annuity no longer meets your current needs.
So, although the structure and terms of some annuities differ, you must always have the option even fully to liquidate the asset if you must.
However, it’s always wise to get the advice and guidance of a reputable funding company before making this decision. If you sell all your annuity at once, you forfeit receiving all future periodic payments. However, if you sell a portion of your payments, you will receive a lump sum of cash now, and later on, you will continue to receive periodic payments.
I Do Need Emergency Cash Now; How Should I Proceed?
First, remember that although you have the right to sell your annuity, you want to do so in the most optimum way possible. You may need all of your cash, but that is only sometimes the case, and a partial sale usually may solve your immediate cash problems.
Also, no matter your reasons for selling, your funding company will always provide you with all your options and explain the “pros & cons” involved in these transactions.
Well-run, knowledgeable, and reputable funding companies will always ensure that your selling reasons are sound and that all financial rules and regulations are followed. That way, you’ll get the cash you need in the most rational economic manner possible.