Prolonged Annuity Payments Versus a Lump Sum Now

Investing your money

If you have been looking for ways to reduce debt so that you can manage your finances better, receiving a structured settlement annuity may seem like the break you have been waiting for you. However, there are several things that you should know before signing on the dotted line to receive your annual or monthly payments.

  1. Prolonged Process
    After you find out that you are going to be receiving annuity payments, it can still take a very long time for you to actually have them in hand. The waiting period could take months, even years before you ever see a penny of your money. The reason for this is that there are so many legalities and processes that a company must go through when doling out this type of cash. Then there’s the question of how they will report it on their taxes and so their accountants have to hold on to it for awhile. What it really comes down to, is they are dragging their feet.

  2. Small Payments
    If your settlement is coming from lottery winnings or winning a case like an auto accident, these companies will do everything in their power to not have to pay out a lot at one time. Setting up payments with you will be done in such a way that it benefits them. They are not thinking of your best interests. Sure, they may give you options of amounts and time frames but all of them are first of all beneficial to the one giving away the money. Usually, annuities are spread so thin and for so long that the payments you end up getting every year or month are so small that they barely make a difference. You may be receiving money for the next 30 years but the payments will be very small amounts.

  3. No Tax Breaks
    You will still have to pay a very large amount in taxes the following year after receiving your earnings. This is on top of what will already be taken out in order for the company to pay taxes. Yes, they will take it out of your money. And then you have to pay your own taxes out of it also.

So, what else can you do? How can you avoid these problems? You can sell your annuity. What does that mean? Well, once you know the amount that you are going to be getting, you can sell that amount to a company that will buy it for a certain price. While there may be fees and things like that involved, there are many benefits that could outweigh waiting for your yearly installments. If you choose to sell your annuity, this means several things:

  1. Immediate Payment
    Typically, When you want to sell your annuity, you don’t even have to wait to find out if you have won your case or not. If you know the amount of the settlement, you can put in an application for sale at one of these places. They will give you an offer and once you accept it, you can expect a check within days.

  2. Quick Turnaround
    The whole process can take less than two weeks once it’s started. Actually, the main waiting periods are up to you. Your application will be reviewed and an offer made, as mentioned above and then it really is up to you how long you wait to accept or deny. You can negotiate the final amount as well if you don’t mind waiting a few extra days for your payment to get to you.

  3. Lump Sum
    Selling your annuity payments means that you will receive your money in one lump sum. No more waiting year after year for your money to get to you. You can have it all right here and right now. This is extremely beneficial if you are trying to pay off medical bills, get out of debt or pay a large item.

Deciding whether or not to sell your annuity is a big choice. It really comes down to what is in the best interest of your life goals. If all you are doing is saving for nothing in particular, annuity is fine. But if you have plans to travel or live large, you’ll need all of your money as soon as you can.

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