When you receive a regular structured payment for a long period of time, it is often called an annuity. You may be receiving regular monthly payments from a worker's compensation payout, a winning lottery ticket, a purchased annuity, a legal settlement or a variety of other sources. Many people are happy to get this regular income coming in. Some people may find that after a while that they need a lump sum now and would be willing to give up some, or the entire income stream for that immediate lump sum. Some people don't "need" that lump sum; they just feel that they can get a better return on their annuity.
Is that possible? Often you aren't able to cash in the annuity with the company that you're receiving it from. If you can, you might have to pay a hefty surrender charge. So a secondary market has grown where companies are willing to purchase your annuity. They get the income stream coming in and for that they are willing to give you an immediate payment. How much they pay you depends on a number of factors.
- How long remains on the payout?
- What is the monthly payment?
- How much of a return the buyer wants to earn on his investment.
There are also several choices that you'll need to make about how much of your annuity you wish to sell.
- Do you want to sell the remainder of the annuity in its entirety?
- Do you want to sell just a set number of payments, keeping the rest of them for your use?
- Do you want to sell part of each payment for the remainder of the term, or for a set period of time?
The amount of money you will receive for selling your annuity will depend on the terms of your annuity and how much of it you want to sell.
- You can use a website such as Quote me a Price to give you an idea of what you might receive. You'll need to input your annuity particulars and what portion you interested in selling. This particular website will send your information out to the various companies who will then bid on your business.
- You can also check directly with a variety of firms that buy annuities. You may find them listed on the internet, in the phone book, or through a referral. It definitely pays to shop around. Different firms are willing to pay different rates. Don't settle without checking with several companies.
- Make sure this is what you really want to do. If you are selling your annuity because you can do better, don't forget to factor in things like risk. You may be giving up a pretty risk free investment for something far more risky. Are you willing or able to handle that additional risk and the possible loss that can come with it? However, if you need the money now for something, just make sure that the terms of the sale work within your needs. Make sure you shop around.