Annuities are a pretty controversial topic in the world of finance these days, with some people arguing that annuities are great investments, and others arguing that the only good annuity is one that was sold to a settlement purchasing company.
To understand why so many people want to sell their annuities — and why they turn to companies like Structured Asset Services to receive cash for annuity payments — let’s start right at the beginning.
An annuity is a type of insurance plan for retirement; once a person retires and becomes eligible to withdraw from his or her annuity, it functions a bit like a regular paycheck. You invest in the annuity — this may also be called purchasing the annuity — and decide when you can withdraw your cash again (most annuities have specified waiting periods or simply require that the investor is retired before he or she begins to withdraw money).
There are a few different options to choose from when you set up an annuity, and most plans will focus on when your cash can be withdrawn and whether it will be sent to you monthly, annually, or just in one lump sum. Most people turn to annuities simply because they don’t like the idea of retiring and not having a steady paycheck.
The two main types of annuities are deferred annuities and immediate annuities. This differentiation refers to the amount of time you must wait, after making your first investment, before you can withdraw it. A deferred annuity will be locked up for a certain length of time, whereas an investor can begin receiving payments from an immediate annuity very quickly (usually about 30 days after the first investment is made).
Most people only choose immediate annuities if they are already close to retiring — it’s the deferred annuity that seems like a great idea at first, but ends up turning into a financial prison for the investor. Many investors end up turning to a third-party service that will provide cash for annuity payments which would otherwise be locked away and inaccessible.
The most obvious advantage is that you can set aside a sum of money — without paying taxes on it — and then “earn” that money back when you retire. Additionally, because so many companies have begun taking away pension plans for their employees, more people have turned to annuities to provide a regular income during retirement.
The disadvantages, however, often overshadow the advantages. Because annuities are sold through other parties, you have to pay a commission on your investment. Even though you don’t have to pay taxes on the money you invest, there are many other investing and management fees you have to pay. Additionally, annuities rarely account for inflation; this means that the amount of money you invest will drop in value by the time you start taking it out. And of course, if you decide you want to withdraw your money before the waiting period is up, you’ll be slapped with huge penalty fees.
Why do people want to withdraw money early, or just sell their annuity entirely?
People often look to get cash for annuity payments for the same exact reason why they invested in an annuity in the first place: because the economy is unpredictable. An annuity won’t gain interest over time, making it a poor investment strategy. It’s the modern equivalent of burying a box filled with cash in your backyard.
So how is it possible to get immediate cash for annuity payments without having an immediate annuity plan? One option is to withdraw your money right away — but the surrender charge is typically 7 – 10% within the first few years or if you withdraw the money before turning 59.5 years old (and honestly, this is still a lot of money that originally belonged to you).
Another possible solution to get immediate cash for annuity payments is to consult with a structured settlement and annuity payout company, like Structured Asset Services. With this option, you don’t have to worry about early surrender charges because technically, you aren’t backing out of your annuity. Instead, you’re selling that investment to a service that will wait until the money can be withdrawn, and in return, you receive upfront cash for annuity payments without worrying about cancellation fees, inflation, or tax increases on payments in the future.
Most importantly, when you use a service to receive cash for annuity payments upfront, you never have to worry about your money being stored away in a “safe” place that also happens to be completely inaccessible. While many people find that annuities are great retirement and insurance options, they aren’t for everyone — and you shouldn’t be penalized for changing your mind.