Back a few months ago I wrote an article about how to sell annuity payments in return for a lump sum amount of cash. However, in that article I didn’t really cover the reason why you defiantly don’t want to sell. So in this post I want to cover 6 reasons why you should never sell your annuity payments.
Why You Shouldn’t Sell
- Someone told you to sell. The worst part about selling your annuity is the fact this type of industry is not very well regulated. In fact there are a lot people out there willing to take advantage of you and tell you anything in order get you to sell your annuity to them. The truth is these people are in business to make money and may be taking advantage of you more than you think.
- Just because you just want to. Selling your annuity just because is not good enough. When you sell for a lump sum payment you will not be getting the full amount. You will only get a portion of the funds. This is what they call a discount, which is usually around 8% to 14% of the amount. For example, if you had $100,000 in the annuity and they gave you an 8% discount that means you would only keep $92,000 in a lump sum. You also have to consider the tax consequences of getting a lump sum this big. Doing this may cost big in taxes.
- You think you have a lot of debt. Sometimes having a lot of debt may cause you to think that it would be better if you sold the annuity payments and would be able to clean the slate in a sense. However, there is one reason why you don’t want to do this. If your habits don’t change when you clean up your debt there is a chance you could wind right back up in debt except only now you aren’t getting any annuity payments to help you out.
- You have no money. Having no money is another poor excuse to sell. In fact, if you have no money there may be bigger reason. To solve this issue look at how much money you are making and examine what you are spending money on. Take a month and track every single penny you spend. At the end of the month look at where you spent your money. The answer should be pretty obvious, if you find a lot of frivolous spending going on you know where the problem lies. Cashing in on your annuity will only make the situation worse in this case.
- To invest in a business opportunity. Business opportunities are one thing but using your annuity cash to fund it is a different thing. Businesses come and go every day, who’s to say the business you are investing in could go belly up in short time. This can be a huge risk financial especially if you’re depending on this month to help you get through the month. Instead of selling for a lump sum payment consider setting aside a small portion of those funds this way if the business does go belly up you still have the payments coming in.
- To lend to a friend or family member. This is probably the worst thing you could do with the money. Helping a family member or friend out is great but if they don’t pay you back there could be more at stake than the loss of your money. Friendships are the corner stone of life and lending them the money could drive a deep stake between you both. A good example I have is when I gave my brother $5000 to pay some debts off. It took me nearly 3 full years to get the money back, not mention the bitterness it caused between us.
Add Your Take On The Situation
So what is your take on the situation? When or when wouldn’t it be a good time to sell your annuity? Of all the reasons I’ve listed what would you add? If you’ve considered any of the above take time to think the situation over before you make any quick decisions. If you’re planning on selling your annuity make sure it’s for the right reasons because once you sell it’s gone forever.