What Should You Know About Your Annuity

Financial advisors often have their client’s needs at the forefront of their recommendations, but often, they make recommendations based solely on the commissions of a transaction. It happens far too often, and usually the more “bells and whistles” the product has, the higher the commission to the advisor. That is not our style.

One frequent question we get is: "I want to sell my annuity. What's the best way?"
Before deciding, here are few things you need to consider about annuities:

At This Moment, How Would You Rate Your Overall Health?

An annuity is usually set up in such a way that you receive regular payments, usually monthly, for a specified period or up until your death. This means that the annuity will only pay the holder of that annuity as long as you live.

Seems simple enough.

If you have better health and a low chance of contracting diseases, it means that you have a higher life expectancy and thus, potential buyers of your annuity will continue to receiving money for a longer period of time. It would result in them associating a higher cost to your annuity, thus getting you more money upfront.

When you provide medical evidence of your health to the buyer, they will make an offer for your annuity based on many factors, but your health is one of the most important factors.

Other and alternative sources of income

You need to make sure that you have an alternate source of money and/or income before you decide to sell your annuity. Since your annuity comes regularly (usually monthly), if you are overly dependent on it and if you consider it to be your primary ‘income’ source, you might not want to sell it. Why? Well, it might be harder for you to live life in the same way you are right now with the same expenditures, but far less monthly income.

Additional costs and tax position

You will have to pay administrative costs and any costs for providing medical evidence of your state of health to the proposed buyer. Normally, medical exams are covered by most health insurance, but we advise you to check with your insurance company first before you agree to an examination with anyone other than your primary care physician. You should also think about the possible tax implications you could face by selling your annuity. When you receive the lump sum, you might be pushed up into a higher tax bracket and you might have to pay a higher percentage of your income in taxes. This could turn a great deal into one that is not so great.

Annuity Legal Holder(s)

The annuity might not necessarily be in your name. What could cause this? Many reasons, but especially if it’s a pension, you may find that the annuity was purchased by trustees of a previous pension fund. You will need to have it transferred to your name if you want to sell the annuity.

Also, the annuity might have been set up in such a way that it continues to pay to your spouse or dependent if you die before them. If this is the case, you will have to talk this out with them prior to selling your annuity as you might need their permission.

Lower sale value of your annuity

When you sell your annuity and receive a lump sum, the latter will not be as much as the previous one as the worth of your annuity will depend on a variety of factors. Some of these factors include age, health and interest rates. In some cases, you might lose up to 25% of the real value of your annuity by selling it for a lump sum payment.

You also need to decide whether you want to surrender your annuity or not. Here are some things you should consider:


You should know that depending on the tax status of your annuity funds, you may be penalized more by the federal government than the insurance carrier.

Change over time

It is very normal that your goals and methods regarding your expenditure change over time. These days, riders are one of the biggest draws to annuity sales. These riders provide people with guaranteed benefits that are stronger and clearer.

Completely yours

As it is your money, you can always opt out of your annuity. You do not require a judge or an insurance home office to guide how and when your well deserved money reaches you.

Uncertain surprising moments

Usually, when bad things happen, they don’t come with an advanced notice. For times when an unforeseen tragedy strikes, surrendering a policy is always an available option. It is optimal when someone requires instant cash as it is safe and easy. You should not confuse this with a loan.

Change in policies

As time passes by, things usually change for the better. The policy you thought was the best deal may look bleak in front of other policies offered today. The one you have may not have all their perks and thus, this might be the ideal time for you to search for some other, better options with the surrender value that you currently own.

Penalties and Surrender Charges

You should definitely look into a company’s surrender charges policy as well as the worth of your annuity. Contact us with getting you the most out of your annuity so your financial stress can be reduced!