After years of hard work, paying bills and investing during your retirement may be a tough stage in life. In fact, if you are not wise, retirement can lead you into a depression since you do not have any source of income or anywhere to invest. Even after retirement, the bills will keep coming and they may even increase. Annuities are a financial product that is sold to individuals by insurance companies. They act an individual’s retirement investment fund and saving. The money set aside may increase each year and is paid without including taxes. In the future, you get their non-taxable money paid to you, which means you’ll have more money to meet your financial needs.
What are the different types of annuities?
There are four different types of annuities that you should know about.
- Immediate annuity: This is the easiest and most common form of annuity. It comes with very basic and easily understood provisions. In the typical scenario, an individual pays a lump-sum cash amount to the insurer upfront. In exchange, the insurer has to send money to the individual starting immediately. One can have the annuity sent for a fixed period of time or for as long as they are alive.
- Deferred income annuity: These type of annuities do not start making payment right away. In this type of annuity, you pay a certain amount, then the insurer promises to give you a certain amount of money once you reach a certain age or after you retire. Once your retirement is final, the annuity offers you supplemental income which is of higher value when you retire.
- Fixed annuity: Here, the value increases based on the returns stated in the annuity contract. However, here you choose when and if you will receive the payment from the annuity payment from the insurer. Interest rates in this type of annuity are also higher.
- Variable annuity: The returns to- be paid, are tied to a certain market. It gives you exposure to a great deal of markets and still gives you the annuities security. Fees can however be expensive.
Annuity Selling Options
There are two ways you can sell your annuities. These are:
Partial selling of your annuity means that you are selling certain amount, specified by you. In this arrangement, you will receive the amount you have sold in cash. You will then not receive any annuity payments for a short period of time. After this period, you will continue receiving the annuities as you did before.
With full payments, you will not receive any amount of payment from your annuity after you have sold them. However, you will receive a huge amount of money which is usually great when you need a huge amount of money all at once.
How Selling An Annuity Works
- Choose a company: The first step to selling annuity payments is to identify a company that you want to sell your annuities to. Choosing the company will require you to know how much money you are expecting and how much the company will charge you for the services they are offering you.
- Paper work: After going to the company and ensuring they are as fair as you thought, you will be required to fill out a number of questions.
- Agreement: You will have to agree on the terms of payment with the company you will be selling your annuities to. If you agree, you contract will be sent to your insurer for verification. This may take several weeks to be processed, however once it is done, you will receive your cash payout almost immediately.
Reasons for selling your annuities
There are several reasons why an individual may choose get funds by going for selling annuity payments.
- Unplanned circumstances: The most common reason why people choose to sell out their annuities is because there was an unexpected situation that arose. For instance if you find a business that you can start that will bring you more money than your annuity is paying you, you may opt to cash out. People also cash out to pay for medical expenses and other bills for themselves or loved ones.
- Inheritance: If you are the beneficiary to an annuity payment, you may opt to cash out in order to have the money to boost your business or make certain financial decisions in your life easy. This mostly happens when the beneficiary has not attained their retirement age.