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 typically set up so 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 small 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. It would result in them associating an increased 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 income before you decide to sell your annuity. Since your annuity regularly comes (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 expenses and any fees for providing medical evidence of your state of health to the proposed buyer. Usually, 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 greater 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 before 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 evolve 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 advanced notice. For times when unexpected tragedy strikes, surrendering a policy is always an available option. It is optimal when someone requires instant cash as it is safe and comfortable. You should not confuse this with a loan.

Change in policies

As time passes by, things usually change for the better. The plan 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 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!


Before getting started, it may be helpful actually to define what an annuity is and what it does.

An annuity is simply a contract between you and an insurance carrier. When purchased for income the contract is for a fixed amount of revenue (payout) in the future (even if that future is just 30 days away) for a stated amount of purchase price right now. Think of it as buying/locking in a future income stream. That is all it is. But then, to differentiate their products from all the others on the market, the variations on this theme begin. But don’t give up hope! You can learn how to compare annuities quickly and easily.


The primary traditional use of an annuity is a transfer-of-risk product (as befits an insurance product). Purchasers are transferring their risk of an uncertain income stream to an insurance carrier for a known, guaranteed income stream. This transfer-of-risk is made possible by the safeguards in the product. In general, the more guarantees an annuity offers, the better the transfer-of-risk and the stronger the product. Therefore, when looking at an annuity, the focus should be primarily on the guarantees and the only reason to buy an annuity is for the guarantees it contains.

However, it is common nowadays for people to purchase annuities (especially the variable type) to take advantage of the tax deferral they confer primarily. If that is the primary reason for buying the annuity, you may not be as concerned with the income payout in the future. While the future income stream may not even be guaranteed as to the amount make sure you know exactly what you are getting into and to get the best deal for yourself.


Annuities sales are on the rise, hitting a total of $230.1 billion total in 2013. Perhaps you are considering how one might fit into your retirement savings or income plan, or maybe you are looking at several different ones but cannot figure out which one would be best.

To be perfectly honest, as a financial services professional I believe it behooves everyone to consider an annuity for at least part of their retirement income plan. There is no harm in checking it out, and if you see it is not for you there is no harm done. On the other hand, if you could benefit from one but neglect to check it out, you could be doing yourself a grave disservice. Checking it out is a reasonable, proactive step to take.

This is about you learning how not to be ripped off when buying an annuity. And learning this is a lot easier than you might initially think.