If you have an annuity that you don not want any longer, you have the option to sell annuity payments to a secondary buyer who will pay you a onetime lump sum for them. The amount you get for your payments depends on many factors, but it is primarily dictated by the rate your annuity is guaranteed for. For example: an annuity that has a guaranteed 8% may fetch more than one that has a guaranteed 3%, or is variable with a lower guarantee.
Selling Annuity Payments vs. Surrendering Them
For a number of reasons, it is oftentimes better to sell annuity payments than surrender them to the issuer. Firstly, when you surrender your annuity in the first few years you are often hit with a considerably steep penalty. On average, that penalty will be in the range of 7-10% or more at first and the rate slowly decreases over time.
Secondly, annuities will often fetch a better return on the secondary market than they will if they are surrendered. For example, let us say that you have a return valued at $100,000 and with the 7% penalty applied you will get $93,000, but if you sold that same annuity to a secondary buyer you may be able to get $110,000 or more, which gets you $17,000 more than you otherwise would have.
The secondary market for annuities is huge in terms of dollar magnitude though measuring in at over $200 billion a year. At that size, there ought to be a buyer for almost every type of annuity.
The size of the lump sum you get for selling annuity payments depends on:
• how much the annuity is valued at
• what the rate of return is on it
• who the buyer is
• the amount they are prepared to pay for them
• the time it takes for the annuity to mature
• a number of other factors
Your best bet is to shop around at a variety annuity buyers and see what kind of price your annuity can fetch. You may also be able to sell only a part of your annuity rather than cashing in the whole thing.
