Understanding Annuities and Knowing When to Sell

An annuity may be a smart choice when preparing for the future, but as with many things in life; they can change. Suddenly and without notice current financial arrangements may no longer meet your needs. According to the U.S. Securities and Exchange Commission, an annuity is a contract that you enter into with an insurance company where you make a lump sum or series of payments that are later returned to you in the form of periodic payments.

Multiple Types of Annuities

There are a few different types of annuities according to the U.S. Securities and Exchange Commission. The three types of annuities include: fixed, indexed, and variable. For the fixed annuity, your insurance company will make an agreement to pay you no less than a decided upon amount of interest each year that the account is growing. This would be from the time you make the arrangement until the time that you begin collecting the money. Also, a fixed annuity will have a designated amount of money that you will receive periodically—this will depend on what you are looking for whether you need payments over 20 years or for the rest of your life.

The indexed annuity and variable annuity are less utilized offers that involve investments and stocks, but they are also valid ways to secure your future earnings. Overall an annuity is a way for you to ensure that you will have some financial stability, typically after retirement.

When to Sell an Annuity

As with most things in life, your financial needs will constantly be changing and what you thought would be a valid option for your future may not be adequate or necessary. This is when you should consider selling your annuity to receive a lump sum of the remaining money. What are some instances where this would be a good option? One would be if you decided that retirement is not working for you and make the decision to go back to work—in this case, you will no longer need the monthly payments and may want to establish a trust fund with the bulk of the money remaining in your annuity.

Everyone should have the option to receive their money when they need it, but the insurance company may not be willing to alter the contract. That is when you can contact an outside company that will purchase your annuity from you, providing you with the lump sum now and they will collect the money from the insurance company, over time.

With any financial decision of this magnitude it is important to give it a lot of thought and consideration and you should not act hastily. Figure out what your lifestyle calls for and make the most financially conscious decision for your and your family.

Mercedes Potter gives tips and knowledge to people dealing with annuities. Annuities can sometimes be confusing if you don’t know what you’re entitled to, or how to make it benefit you the most. She offers help to understand what your annuity is and when you can  Follow her @CedesPotter to see what else she’s been blogging about. www.jgwentworth.com

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