Sales of indexed annuities—fixed annuities with interest rates based on a particular stock market’s performance—have continued on the upward trend that began in 2012. Sheryl Moore, Wink’s CEO, told Annuity News that the growth in sales is likely due to insurance carriers changing their policies to entice careful post-recession investors into buying indexed products. Though people are buying annuities at a record pace, life’s circumstances can change just as fast. There may come a time you no longer need your annuity or need to liquidate it to address a pressing situation. Consider these three things to help you determine your best course of action:
Declining interest rates and the volatility of the fund itself are two common reasons people decide to transfer. Be careful when getting advice from a financial advisor, however—remember, these individuals make big commissions when annuities are transferred from another company to theirs. Exercise due diligence and know the facts about your annuity before talking to anyone about it.
EIAs and variable annuities are considered considered insurance products, so they are not regulated in the same fashion as securities. Most importantly, annuity providers are not required to issue disclosures that break down fees, performance or where the funds are invested. Since each state has different laws regulating insurance policies, become familiar with yours before transferring. Consider transferring an annuity after its surrender period expires, which is typically 10 years after you purchase it. The good news is that your gains remain tax-deferred when you transfer from one fund to another, according to the SEC.
Some people receive structured settlement payment annuities as a result of being injured on the job or in an accident. These payments can usually be sold for an immediate lump sum of cash. Most states have regulations that protect people who want to sell their future payments. In these cases, a state court must approve all sales to ensure the seller is not the victim of unscrupulous advisors.
Get a Lump Sum
Sometimes the best and only option for those with an annuity is to liquidate and get cash immediately. There are several companies that purchase future payments in exchange for a lump sum of cash now. Most states have enacted statutes to cap the amount those companies can charge to purchase future structured settlement payments.
The best advice for people looking to sell their structured settlement payments? Read all the fine print in the application and sale documents and get the advice of an attorney or tax advisor before acting.