Selling Your Annuity Doesn't Have to Be an All-or-Nothing Game
While there are 37,000 people in the U.S. currently using structured settlement annuity payments every year, there are just as many reasons why any one of those recipients might suddenly consider opting for a lump sum payment instead.
Circumstances change, and so do your finances. Young adults under the age of 25 are especially prone to dramatic life changes that require up-front payments or could affect your monthly income: a new job, a new house, a new marriage, a new child on the way. What’s more, this demographic often has to keep up with debt payments on student loans and other investments. Nearly 20% of young people claim to suffer from extreme debt hardship, which can greatly affect the financial decisions you make in the rest of your life.
If you’re thinking about selling your annuity in order to get cash up-front to pay for mounting or unanticipated expenses, it doesn’t have to be an all-or-nothing exchange. You can choose to sell only a portion of your annuity — however much you may need to meet that credit card debt or that down payment on your dream home, for instance — and still continue to receive annuity payments for the remainder of your structured settlement.
As you weigh your options, bear in mind that selling your annuity in exchange for a lump sum payment can incur additional fees of up to 10%. This is precisely the reason many people prefer to receive small payments over time instead of lump sums: the amount you actually receive with large sum payouts can be heavily impacted by federal and state tax rates. When you choose to sell any or all of your annuity in the interim, you will likely have to pay a fee to the lending company who negotiates it for you as well.
Selling your annuity can be a wise decision when it comes to immediately pressing financial costs. Instead of a long and painful mortgage, you could make a larger down payment. Instead of crippling under the weight of mounting student or credit card payments, you can free yourself from the shackles of debt and live your best life now. Approach your finances with careful consideration and a sense of responsibility. Your annuity is yours, after all, and it’s up to you how to best put it to use.