Annuity is a form of insurance where a certain amount of cash is given to an individual annually, or the rest of their life. Insurance firms and financial institutions sell annuities sell annuities to groups and individuals. Investors love annuities as they are able to have an income even after retirement. When you sign a contract between you and your insurance company, you have the option of choosing when to start paying, and when you benefit from the insurance cover.
DIFFERENT TYPES OF ANNUITIES
Annuities can be categorized under two main groups; Deferred and Immediate.
DEFERRED ANNUITIES: In this form, one is not paid until a specific time elapses. This could be after a decade, or more. Sometimes it’s just after a few years. It depends on what was signed on the contract between the insurance company and the individual to benefit. With deferred annuity, there are two stages. The first part is when an investor saves through his deposits, and the second stage; income stage where the investor is paid. This type of annuity can be variable or fixed. With deferred variable annuity, an investor can manage their account whenever they please. This has an advantage as one can make withdrawals or deposit any amount at any given time. On fixed deferred annuities, one is given a fixed rate on whatever insurance product they buy. Here, one is limited on what to access on their investment. During withdrawal, an investor may or may not be limited on the amount they wish to take. This varies from one insurance company to another.
IMMEDIATE ANNUITIES: When investors sign a contract under this form of annuity, they receive pay as soon as they make their first deposit. This is advisable for people who want to get annuity and are almost approaching retirement age. We have fixed and variable annuities under this form. Immediate Fixed Annuities are like pension. The insurance company pays the investor a constant amount every month until they die. The monthly income one gets increases in most cases depending on how old the investor has been with the insurance firm. This type is the most popular, and perhaps the most common around. With variable Immediate Annuities, the investor withdraws the cash from a portfolio of investments.
ANNUITY SELLING OPTIONS
There are two ways one can sell their annuities:
PARTIAL ANNUITY SELLING
The investor makes money instantly when selling this. The individual will still get minimum amounts of annuities even after selling. Partial annuity selling is recommended because one can use the settlement annuities to deal with financial emergencies and needs without having to give up all the benefits.
ENTIRE ANNUITY SELLING
With this, one receives a huge amount of payment upfront. After the payment is done, the investor no longer receives any annuity from the insurance firm. This is permanent, unless they want to change it to a different form.
HOW TO SELL ANNUITY PAYMENTS
• First ensure that your annuity is transferable. You can do this by checking the terms of your contract with your insurance firm. You can apply for a loan from the bank if you want to get immediate cash.
• Be aware of the value of your annuity. You should have this complete information before going out to look for buyers. If not sure, you can hire a professional from any financial organization. They’ll help you evaluate your value.
• Tax. Any investor should be familiar with the tax implications in the state. A 10% tax is charged if you withdraw from your annuity before hitting a certain age.
• When looking for buyers, you should contact your insurance agent so as not to have a difficult time. The agent may charge you an additionally fee for this. You can also look for buyers online. The other option is hiring a broker to do the searching for you.
• When you’ve already made up your mind on what you’ll get from selling, make a straight purchase. You can either sell as a partial or reverse purchase.
REASONS FOR SELLING ANNUITIES.
When selling an annuity, an investor should have some things into consideration. Tax, discount given and the value of one’s annuity should top the list.
People sell their annuities for various reasons:
• To pay debts they are owned by other investors
• When starting a business. This can be an alternative if the starting capital is difficult to get
• To buy property. This includes homes for their families and business enterprises.
• One can sell to pay medical bills for their family and relatives
• Paying for school tuition
• Settling monetary crisis and emergencies.