First of all, what is an annuity? An annuity is a form of structured settlement, where the owner of the annuity receives regular payments, most commonly resulting from some sort of court ordered judgment. Although this is the most common form of structured settlement, there are also lottery winnings, and seller financed mortgage notes that have the same qualities.
Why would anyone want to sell a virtually guaranteed income stream, and give up that cash flow? It could be that the income stream is set up to pay over a long period of time with relatively small payments. A person may need a larger lump sum of money to use for a down payment on a house. If that is what is needed, there are companies out there that specialize in paying a lump sum of cash for your income stream or annuity.
There are a couple of things to keep in mind when selling an annuity or other structured settlement. When an investor wants to buy your income stream, he is willing to give you cash which is less than the value of the total payments you are to receive over the life of the annuity. In other words, the total payments are discounted to what they are worth today by using the required rate of return, or interest rate, by the investor. This can be viewed as the interest rate it would take the lump sum to be invested at to get to the total of the payments at the end of the annuity.
You must realize that selling an annuity is a fairly complex legal process, not like selling a stock, and it can take up to 10 weeks to complete the transaction. There are rules and regulations surrounding the transfer of payments, and would be near impossible to transact without proper legal support. Choosing the right company to handle it is high on the priority list.
Another thing to do is to decide how much of the income stream you wish to sell. In most cases, you can choose to sell all or only part of your annuity. You may only need enough to buy a car, so the payments you agree to sell are transferred to the buyer and then the remainder revert back to you. Again, using an expert in this field would be wise.
Lastly, you should shop around for the best deal. Remember, when selling an annuity, a high interest rate to be used as the discount rate is worse than a lower rate. Essentially this is the rate of return the investor requires. The less he requires, the more money you receive in your lump sum distribution. Search on reputation, discount rate, and fees and
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It is just and natural that every employee saves some money for his future.He has to invest these savings so that after his retirement,he gets some money every month which he can use for his day to day needs.
ReplyDeleteWays to sell annuities :
1.Other pension.
2.Security for a loan.
3.Big purchase.