If you have an annuity or structured settlement, you may be inclined to relegate it to the back of your financial portfolio as the product that you can do nothing about. For many holders of annuities or structured settlements, this may be a fine strategy. You get to sit back and let the periodic payments roll in while you focus on other affairs. For others, however, the trickle of small periodic payments over time may not be as valuable as other ways to invest your money.
The good news is you don’t have to consign yourself to the terms of your annuity. Instead of receiving periodic payments, it’s possible to sell an annuity in exchange for a lump sum of cash now. Why are more and more people selling fixed annuities and structured settlements on the secondary market? Here are some of the top reasons it may make more sense to sell an annuity than continue to receive the periodic payments over time:
- To pay off debt
As many as 64 million U.S. adults reported they struggled to pay their bills or medical debt in 2014. The average American adult owes $11,244 in student loan debt, $8,163 on their car, and $70,322 towards their mortgage. Taken as a whole, the average American household has $15,355 in credit card debt and $129,579 in debt overall. This results in $11.91 trillion in debt across the nation as a whole.
To compensate, many lean on credit so they can meet their daily living needs. An average consumer holds 3.5 credit cards. But credit is only a temporary balm as 15.9% report they pay only the minimum balance each month. And 70% of Americans feel credit card debt carries the greatest stigma of all.
It can seem a never-ending pattern, a revolving door you keep circling around and around without ever being able to cross to the other side. If you hold an annuity or structured settlement, it doesn’t have to be. - To pay for school
Speaking of debt, not many things can trump education expenses in terms of generating debt fast. The average private college tuition and fees for the 2014-2015 academic year amounted to $31,231, according to College Board. Public school for state residents was significantly more reasonable at $9,139, but the last thing you want to be the determining factor in which university you attend is cost.
There are always student loans, but taking a loan leads us back into that revolving door of debt and a future of $6,658 average annual interest payments. In 2014, total outstanding student loan debt was $1.21 trillion dollars. And outstanding student loan debt has only been climbing sense: by 2015 that number had risen to $1.3 trillion. By selling your annuity payments or structured settlement payments, you can receive the necessary cash now to pay for your tuition and fees up front. - Buying a new home
While we’re on the topic of avoiding debt, let’s talk buying a new home. Back in 2010, a new home cost on average $272,900. We probably don’t need to tell you just how much higher that number has climbed to today. Just recall that the average adult owes $70,322 on their mortgage and you’ll get an idea of what the future looks like for new home buyers.
The biggest trouble is most mortgage lenders require cash down payments before you can even get started. On average, those payments range from 5% to 10% or even 20% of the sale price of the home. If we were still in 2010 that would mean a down payment of anywhere from $13,645 to $54,580. Unfortunately, we’re not in 2010 anymore and depending on where you’re hoping to live, those numbers could be horrifically higher.
If you’re hoping to buy a new home and need cash now, one options is to sell an annuity to make the funds available.
These are just three of the most common reasons to sell an annuity or structured settlement. There are of course as many reasons as there are annuity holders, and it’s up to you to assess if your current needs warrant selling your annuity or not. The good news is it’s an option and one that could help alleviate a lot of unnecessary strain on your cash flow.
