Taking Your Financial Power Back Selling Your Annuity

While annuities can be a useful financial tool, they are often more trouble than they’re worth. Thankfully there are ways to take them off your plate and get cash for annuity payments to gain what you need from an annuity in a more realistic timeframe.

There are several types of annuities. There are immediate annuities, fixed annuities, variable annuities, and equity indexed annuities. The good news is all annuities offer tax-deferral. From the time you put money into an annuity, any future taxable interest or gains are not annually taxable. However, more advantages of annuities turn into disadvantages down the road. Sure, you get the tax deferral if you’re accumulating, but when you take distributions, which are extremely common, there are some nasty surprises.

Here are some examples:

Every penny of gain inside an annuity is taxed at ordinary income rates and if you’re in the top tax bracket of 35% that rate usually ends up being about 20% higher than long term capital gain rates.

If you purchase a variable annuity, ongoing investment management and other fees often amount to 2% to 3% a year.

If you make a withdrawal within the first five to seven years of establishing an annuity, you will typically be hit with surrender charges of up to 7% of your investment or more.

Withdrawals made from most annuities before age 59 1/2 are subject to taxes and a 10% early withdrawal penalty.

Once you reach the age of 70 1/2, you will have to start taking withdrawals from your annuity in certain minimum amounts specified by tax law (with exceptions for Roth IRAs and for employees still working after age 70 1/2).

Fortunately, you can sell annuity payments. Selling your annuity can afford you the opportunity to do any number of things without the continued hassle of being taxed and taken advantage of. Getting cash for annuity payments is a great option for those who need a large sum of money sooner rather than later, for those who perhaps inherited an annuity and don’t have the means to maintain it, or for those who are just tired of the expensive surprises that go hand in hand with withdrawing anything that doesn’t fit within the timeframe allotted. If you’re asking yourself, ‘can I sell my annuity? Is this a viable option for me?’ it might be time to consider getting cash for annuity payments and other options and see what best suits your financial state of affairs.