How to Get Immediate Cash for Your Annuity...

Tags

How to Get Immediate Cash for Your Annuity...

How to Get Immediate Cash for Your Annuity

If you find yourself financially strapped for any reason, you can get immediate cash for your annuity payments. Follow the steps below to find out how to cash in on your annuity payments in the United States.

Step 1:
Read Your Contract First. Review the details of your annuity contract. Pay attention to the full disclosure clause on your agreement. It’s important that you understand that you are selling the correct portion of your annuity payments for a lump sum cash payment.

If you aren't sure what the contract statements mean, see a lawyer, financial adviser or a community budget center helper for a clear explanation.

Step 2:
Don’t cash out your annuity if your contract states that you are allowed withdraw a certain percentage of your initial investment without incurring a penalty. For example, if you initially invested $200,000 and you are allowed to withdraw up to 5% per year, you could simply take out $10,000. If you take that option, you get some immediate cash and your annuity remains intact.

Cashing In the Annuity

1.Understand the process. If you are seeking a lump sum of cash in lieu of structured payments, you are in effect signing over all your rights to receive your future annuity payments to someone else the entity that is giving you the lump sum cash.

Be aware that in the long term, your annuity is worth much more if you receive structured payments according to the original contract. Talk to your insurance agent to determine the exact worth of your annuity you may decide to ride out your immediate cash flow crisis instead of cashing in.

2. Research companies that offer cash for annuity payments. You will never receive the full value, of course, but companies have a wide range of options anywhere from 60 to 85% of the worth of your annuity. Getting 85% of your annuity’s worth is obviously more desirable than getting 60% of its worth. Since you are legally transferring rights to payments, you want a company that follows standard procedures and walks you through any necessary court proceedings.

3. Have your attorney review all documents before you consent to any agreement. This will help to ensure that you understand what is happening and that it is done correctly.

4. Play it safe and retain some of your annuity. You are not usually required to sell all of it. You can decide to sell a designated portion of it and still get annuity payments in the future. The company you sell to will still make a profit, but at least you’ll have some immediate cash and still be able to look forward to some retirement income.

How to Cash Out of an Immediate Annuity

An immediate annuity is a type of life insurance policy. Unlike traditional life insurance policies, which provide a large sum to your beneficiaries upon your death, an immediate annuity provides smaller, regularly spaces payments from the time that you purchased the annuity until your death. In some circumstances, however, it is possible to "cash out" your immediate annuity, and remove funds which are not yet designated for distribution. Knowing how to cash out of an immediate annuity can provide you with necessary funds should you encounter an emergency or severe financial hardship.

Step 1: Decide exactly how much money you need at the present moment to meet your obligations. Try to avoid requesting extra money that is not immediately necessary.
  • While "cashing out" your immediate annuity suggests that you will be taking out all of the money currently in it, this doesn't necessarily have to be the case. In fact, you can take out only a portion of your immediate annuity -- the amount you need to get through your hardship -- and save the rest for later use.
Step 2: Understand the penalties you will incur by using part of the money in your immediate annuity earlier than planned.
  • In most cases, you will be charged a substantial penalty. In fact, individuals under the age of 59.5 should be prepared to pay as much as 10 percent of the total deduction as a penalty.
  • Even if you are not required to pay a penalty as a result of cashing out, you may still have to pay taxes on the money. Typically, money that is cashed out from an immediate annuity is taxed at the same rate as that which you receive as income.
Step 3: Provide proof of your need for the funds.
  • You may be required to explain to the company holding your immediate annuity why you need the money immediately. Needing the money to make a car or house payment are legitimate explanations for cashing out an immediate annuity. In contrast, wanting to make a luxury purchase such as a party boat may not valid.
  • "Trigger" events, such as being diagnosed with a terminal disease, being placed in a nursing home, or becoming severely handicapped also allow you to cash out your immediate annuity.
Step 4: Complete the required paperwork.
  • To cash out your immediate annuity, you will need to fill out the appropriate documents. Your annuity broker will provide you with the necessary documents and help you fill them out if you have questions.
  • You will generally need two forms of ID, a copy of your settlement and release agreement and a copy of your annuity policy.
Step 5: Wait to receive word from the broker as to whether they will provide you with the funds or deny your request.
  • Even though you may have indicated a desire to cash out your immediate annuity, this process is not guaranteed. The organization which holds your immediate annuity will review the request to determine how great your need really is. In some cases, this review process can take several weeks.
  • If the organization decides to grant your desire to take cash from your immediate annuity, you will receive the money in your bank account within a few days. In addition, they typically will provide documentation explaining how and why they came to the decision they did, and a run-down of how much money remains in your account, if any does. Even if they reject your request, you should still receive an explanation of the review process.

From wikihow