An annuity is lumped into the same market as stocks, bonds, and mutual market funds but historically have been a lot harder to cash out. An annuity is a piece of paper you purchase for “X” amount of dollars and after so many years it then starts paying you “X” amount of dollars each year for another so many years. They are very beneficial and can definitely be helpful for future retirement or sending the kids to college. Now a days though, it is possible to sell your annuity for a lump sum having the right annuity information.
When looking to sell an annuity there are several things you need to look at first. If you cash out an annuity early you may only get a quarter of what you would otherwise get at your payout date. So you need to decide if the reason you are cashing the annuity out is worth losing a large amount of money. If it’s a real emergency then it may be the right thing to do just remember you are giving up the long term financial benefits if you cash it out.
When cashing out an annuity there are also fees and taxes you may not know about. If you are under 59 years old then you recieve a ten percent tax penalty that goes straight to the IRS. Some annuity’s do offer waivers so you can avoid this high tax penalty. You will want to read the fine print because they usually only work if your taking it out for serious illness or nursing home confinements. Some will also let you take out as much as ten to fifteen percent with no penalties. Either way you’ll want to look at every option or penalty before you cash out your annuity.
The last thing you will want to look at is the 1035 exchange. This exchange allows you to exchange your annuity for another. However, if you need to get your hands on some fast cash then this option won’t help you. You’ll have to go back to the other options.
Cashing out an annuity is easier then it used to be but still may be difficult to do. You will also want to weigh all your options and study your annuity information before you decide that cashing out your annuity is the best one.
