Can I Sell My Retirement Annuity?

Yes, many retirement annuities can be sold, but whether or not you can sell depends on your specific annuity. Some factors that can affect your ability to sell are the specific type of annuity you have, whether or not your payments have started, and the specifics of your contract language. There are many reasons why retirees might explore selling their annuity, such as medical expenses, paying off debt, or other immediate cash needs.

However, selling your annuity in exchange for a lump sum will mean that you get less than the value of your future payments. While this might make sense in some situations, selling your annuity is not always the best option. Knowing whether or not you can sell your retirement annuity often starts with getting a better understanding of how retirement annuities work and learning more about the type of annuity that you own.

What Is a Retirement Annuity?

A retirement annuity is an insurance contract that allows you to receive regular payments during retirement in exchange for upfront premiums. These types of annuities provide retirees with a steady and sometimes guaranteed income stream for a certain amount of time or for the rest of their life. They are designed to help people convert their savings into a steady, predictable income and help provide protection against outliving your savings.

Retirement annuities are typically purchased in one of two ways. Buyers can either purchase an annuity with a lump sum payment or by making a series of premium payments. The method that you use to buy your annuity typically will depend on your personal financial situation and when you need your income payments to start.

Retirement annuities have two main phases:

• Accumulation
• Distribution

During the accumulation phase, the funds in your annuity are able to grow on a tax-deferred basis. If you purchased your annuity by making payments, you may still be contributing money into your annuity account during the accumulation phase.

Once you enter the distribution phase, you will start to receive regular payments from your annuity. This is sometimes also called the annuitization phase, and your payments may be monthly, quarterly, or yearly. Whether or not you can sell your annuity sometimes depends on whether you are in the accumulation or distribution phase.

How Does Selling a Retirement Annuity Work?

You can sell many types of retirement annuities, and this overall process looks very similar for each type. You might also hear this process called:

• Annuity buyout
• Selling your annuity payments
• Assigning annuity payments

Essentially, you give up your right to future payments in exchange for an immediate lump sum payment. It is important to understand that you generally do not sell the annuity contract itself. Instead, you sell the right to receive future payments.

It is often helpful to look at an example of how this works. Imagine that you receive monthly payments of $1,000 from your annuity, and you are entitled to receive those payments for 10 years. The total value of your future payments would be $12,000 per year times 10 years, or $120,000. If you decide to sell your retirement annuity, you might receive lump sum offers ranging from $95,000 to $105,000.

In some situations, you might be able to make a partial sale. Instead of selling all of your future payments, you only sell a portion of those payments. This can be beneficial because it could allow you to get enough cash for your immediate financial need while still preserving some of your future financial stability.

Exploring Common Types of Retirement Annuities

Whether or not you are allowed to sell your annuity often depends on the specific type of annuity you have purchased. Here are some of the most common types of retirement annuities and more details about your ability to sell each one.

Immediate Annuities

Immediate annuities are ones in which the payments begin soon after purchase. Many times, an immediate annuity is purchased with a lump sum and your payments start almost immediately. In most cases, these annuities can be sold.

It is usually easier to assign payment rights in these cases because the payments are already established. The amount and timing of the payments is likely already set, so buyers do not have to take on as much risk when they purchase one of these annuities on the secondary market.

Deferred Annuities

Deferred annuities are typically still in the accumulation phase, and the payments do not begin until some point in the future. In fact, you might still be contributing money or making payments into the annuity. While it is possible to sell a deferred annuity, there are also other methods for accessing a lump sum of cash from these.

Other options for getting cash from your deferred annuity are:

• Withdrawals
• Surrender (or partial surrender)
• Buyout offer

It is important to note that making withdrawals or surrendering your annuity can come with big fees. This process can also have substantial tax consequences, so you should always consult with a financial professional prior to making your decision.

Fixed Annuities

In most cases, you can sell your fixed annuity if you need to. In fact, fixed annuities are usually very attractive to potential buyers. This is because a fixed annuity provides a very predictable income stream since the payments are guaranteed. Although buyers would still apply a discount rate to the annuity, a fixed annuity will typically fetch a decent offer on the secondary market.

Variable Annuities

While variable annuities can be sold in some situations, the process is much more complex. Variable annuities are dependent on the interest rate market and stock market performance. Therefore, the income generated by these annuities is not as predictable. This makes a variable annuity less attractive to a potential buyer because it generates a high level of risk for the buyer.

Structured Settlement Annuities

Structured settlement annuities are commonly the result of personal injury settlements, and these annuities have very specific legal protections in place. You can sell a structured settlement annuity, but doing so requires court approval. The judge will determine whether the sale is in your best interest, and they may deny the sale if they find it would be too harmful to your financial future.

In addition to the type of annuity that you own, you must also examine several other factors to determine whether your annuity can be sold. Not every annuity owner will qualify to sell their annuity, even if it is possible to sell the type of annuity that you own. Keep reading below to additional eligibility criteria.

Additional Factors in Determining Whether Your Retirement Annuity Can Be Sold

In addition to the type of annuity that you own, there are several other factors that can affect your ability to sell your retirement annuity. Some of those include:

Contract Terms

When you purchase an annuity, you are entering into a contract with the insurance company. The insurance company agrees to pay you regular payments for a period of time in exchange for an upfront premium. Some annuity contracts specifically prohibit the sale or assignment of your payments, and others may place certain restrictions on your ability to sell.

Payment Status

Immediate annuities with active payments are usually easier to sell than a future annuity. While you might still be able to sell a future or deferred annuity, these types of annuities are generally not as attractive to potential buyers. This is because the buyer will have to wait in order to start receiving their money back.

Ownership Details

In order to sell an annuity, you need to be the owner. If you do not own the annuity, you likely will have no right to sell it. However, beneficiaries who inherit annuities can sell those annuities in many cases.

Your Age and Health

In some cases, your age and health may affect your ability to sell. This may come into play if you have an annuity that pays for the remainder of your life. If you are in bad health, a potential buyer may see purchasing that annuity as too high-risk.

When Does Selling My Retirement Annuity Make Sense?

There are many reasons that someone may decide to sell their retirement annuity. In some cases, it does make sense to sell your annuity for an immediate lump sum. Some scenarios in which selling may be the right decision include:

• Unexpected medical expenses
• Paying off high-interest debt
• Significant change in life circumstances
• Better investment opportunities

Remember that selling your annuity means that you will get less money for it today than the value of your future payments. This means that you must ensure that the value you see today outweighs the loss that you would take as a result of the sale.

How to Decide Whether to Sell Your Retirement Annuity

Just because you can legally sell your annuity does not mean that you should. You must carefully weigh your need for immediate cash versus your long-term financial plan and stability. Selling your annuity for a lump sum today could leave you in financial trouble down the road.

First, you should make sure you get multiple offers. You may find that getting multiple offers saves you thousands of dollars, as offers from one company to the next could be vastly different. Avoid companies that use high pressure tactics and try to force you into an immediate deal.

Next, make sure that you work with a reputable company who will not simply try to push you into a quick cash sale. Companies like Strategic Capital are trusted in the industry by financial professionals, and they will help you explore all your options. In many cases, they may guide you toward a partial sale which would allow you to get the cash you need now while still preserving and protecting some of your future payments.

Finally, seek professional help and guidance. If you have any questions about the process or your overall financial picture, you should get help from a financial professional. A financial advisor can help you understand the implications of selling your retirement annuity and help you make a confident decision in your path forward.

Conclusion

Many types of retirement annuities can be sold, but there are other factors that can also influence your ability to sell and how much you can expect to receive for your annuity. Immediate and fixed annuities are usually the easiest to sell, although variable and deferred annuities can still be sold in some cases. You should always carefully weigh all your options and get multiple offers prior to selling to avoid making an impulsive decision. It is important that you understand the long-term financial impact that an immediate sale would have on your future.