For those that have received a financial settlement and have future payments from an annuity you do have some options on how you receive your cash. While the initial settlement was set up to take care of your needs over the long term it is not flexible if your situation changes and you need a larger sum of money today. However, you can sell your annuity to receive cash today if you have a need. The following will help you understand your options and when it makes sense to sell your annuity.
When selling your annuity the following are some of the factors you will want to take into account:
1. The value of your payments
2. How many payments you want to sell / how much cash you need
3. Who will be buying your payments
First and foremost you need to know how much your payments are worth in a lump sum. Since the company that buys your payments will have to wait many years to recoup their investment (by way of a lump sum to you) it is also necessary to account for the future value of money. As an example, a dollar today is worth less then a dollar twenty years ago. That is, you could have bought far more with your money twenty years ago then you can today. Equally true, is a dollar today is going to be worth less then a dollar twenty years from now. The buying power will go down as inflation and the cost of goods rise. Because of this, the buyer will make calculations to try and determine the true value of your future payments in today’s dollars. Once they have done this they can provide an accurate offer on how much they will purchase your payments for. If that amount is reasonable to you then you proceed. If not, either talk to a few other companies that buy annuity streams or of course you have the option to not sell any payments as well.
If you do decide to proceed, you will need to understand how many payments you want to sell by determining how much cash you need. If you can try to best estimate how much money you need today and may want to meet your short term needs you can then determine how many payments you need to sell to reach that amount. The company buying the payments can help you come up with these calculations. Again, if you are comfortable with the numbers then you can proceed.
If you do get quotes for your payments that seem reasonable then you need to be aware of the process to sell your payments. Ask the representative you call to outline the process and timeline for your particular circumstances so you have full information entering the transaction. It is also helpful to know that you can request a cash advance on your lump sum payout. Completing the process to sell your payments can take thirty to ninety days so it is often helpful to receive some cash immediately which most companies will provide if you ask for it.
If you want to get a quote you can submit your information to multiple firms if you are so inclined. The positive if you do this is that you will receive competing bids for your settlement. The downside is that multiple companies will your information will call you to try and win your business. Just make a decision in advance if you want to talk to one, two or three firms.