Since annuities can be very confusing, many people are looking to get out of their annuities but aren’t sure how to sell annuities, or even if they can. There are a number of reasons to get out of an annuity, for example it may be tax advantageous to put the money in another investment or perhaps they are looking for a better return on investment. Many people sell annuities to get money quickly for medical bills, to pay down a mortgage faster, or any other reason.
If you have an annuity that you no longer want, then you have the option to sell your annuity to a secondary buyer who will pay you a onetime lump sum in exchange for your annuity and its future payments. The amount you get for your payment depends on a number of factors, but it is primarily driven by the rate your annuity is guaranteed for. In other words an annuity that has a guaranteed 8% may fetch more than one that has a guaranteed 3%, or is variable with a lower guarantee.
Selling your annuities can often times be better than surrendering it to the issuer for a number of reasons. First when you surrender your annuity in the first few years you are often hit with a pretty steep penalty. Typically that penalty will be in the range of 7-10% or more at first, and the rate slowly decreases over time.
Secondly annuities will often fetch a better return on the secondary market than they will if they are simply surrendered. For example, you may have a return valued at $100,000 and with the 7% penalty applied you will get $93,000, but if you sold that same annuity to a secondary buyer you may be able to get $110,000 or more, which gives you $17,000 more than you otherwise would have. This example is totally hypothetical, but I’m sure you get the idea.
The secondary market for annuities is huge in terms of dollar magnitude though, with a recent Bankrate article that referenced the market measuring in at over $200 billion a year. At that size, there should be a buyer for almost every type of annuity be it fixed annuities or variable annuities.
Most anybody can sell their annuity, but how much you get for it depends on how much the annuity is valued at, what the rate of return is on it, who the buyer is and how much they want to buy it, how long until the annuity matures, and a number of other factors. Your best bet is to shop around at a variety annuity buyers and see what kind of price your annuity can fetch. You may also be able to sell only a part of your annuity rather than cashing in the whole thing.
While the secondary market for annuities isn’t huge, there are a lot of companies that will buy your annuity from you and give you good value. That said, there are also a lot of companies out there that will try to rip off people who don’t fully understand their annuity policy and take advantage. There are some regulatory agencies out there like the American Council of Life Insurers that try to keep markets in check, but just like any other big money investment arena, there are always people and companies trying to take advantage.