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Debating on selling annuity payments? The right thing to do

There have been worries about selling annuity payments. Many have wondered whether this is right or not. This post is for anyone with such concerns…

WHAT IS AN ANNUITY PAYMENT?

A contract set up by a financial institution or an insurance company selling a product which consists of payment of a fixed amount of money. Funds which can serve as form of investment, are accepted which accumulates and grows. The time when an annuity is growing before it gets paid out is called the accumulation period but once it starts getting paid out, it is called the annuitization stage.

The general idea behind the concept of annuity is to have a steady source of income upon retirement or if one outlives one’s assets or income, this can be annuitized. A lump sum of money could be stretched out with annuity payments.

ANNUITY PLANS

There are different types of annuity plans that could work according to what best suits a client’s needs.

  1. Variable annuities – With a variable annuity, the individual is free to choose investments and make earnings depending on how the investments play out. These investments have various degrees of risks, but at the same time, they equally have the possibility to yield good returns. All of this will depend on how much risk the individual can take or what the individual is looking to achieve. If this investment goes as expected, the client will receive greater cash flow but otherwise, will receive smaller cash flow.
  2. Fixed annuities– If one has a lump sum of money that can be tied up, this plan would be most suitable. The investment and the value of what will be earned on it is guaranteed. A plan of payment can be worked out on how the annuity will be paid. This is also a smart choice for those who suspect that they might outlive their assets.
  3. Immediate annuities – This can also be purchased with a lump sum but the payment starts immediately or just a short time after the investment is made. The stream of income is guaranteed however, it might be irreversible once the payments start.

WHY SELL AN ANNUITY?

  • Security – Unforeseen events happen, over which people have no control. Life happens and if it turns out that the annuity payment can no longer meet the needs, this decision might be necessary. Some examples such as mortgage payment, payment of high interest debts, tuition and other important needs.
  • Divorce – If a plan was made jointly by spouses, after a divorce, selling off the annuity would be a logical thing to do. That way, both parties can split the funds immediately.
  • Inheritance – If someone inherits an annuity and would prefer to spend the funds another way, instead of receiving the money in a spaced out period against their will, the person would be free to sell it off.
  • Or the person realizes that the reason why the annuity plan was taken in the first place no longer applies.

Sell Annuity Payments For Cash

One good thing about selling annuity payments for cash is that the individual has the cash at hand. However, most companies advise people who might be getting housing benefit or pension credit to be cautious as it not certain whether such people would have an increased benefit even if their income may have dropped due to the annuity sale. Also, the money received from selling an annuity remains taxable the same way income from any source is taxable.

HOW TO SELL ANNUITIES – OPTIONS

There are two alternatives for selling annuities: partially and entirely.

Selling partially – Selling just a part of one’s annuity leaves the person eligible to continue receiving payment at intervals according to what might have been agreed on. A person could also space out the partial selling by selling in lump sums over time. This payment keeps tax benefits as agreed on and should the receiver pass away before receiving all payments, the tax benefits will be extended to heirs.

Selling entirely – With this, all investments will be ended and this puts an end to any payments in the future. The lump sum will be received for the person to do with as he or she sees fit.

Selling annuity payments for cash could be an end to a means, it is all a matter of preference. Should the need arise, there is no need to beat oneself over it especially if there is a plan in place not to spend the cash unwisely. This money could be to start a new business, pay off student loans or high interest debts. One does not have to put life on hold by deferring payments that can already be made from selling off an annuity. There are numerous financial institutions and insurance companies that will willingly help in this area.

https://www.opm.gov/retirement-services/my-annuity-and-benefits/annuity-payments/

Credit Card Debt Is Rotten To The Core and You Need To Get Rid of It

Credit card debt is the amount of money you owe to a credit card company that you do not pay off in full each month.

And it’s pretty much always bad debt because it’s usually used to purchase things that won’t turn a profit (ex. clothes, furniture, entertainment, dining out etc.).

On top of that, it’s one of the highest-interest methods of borrowing money.  Credit card interest rates can be as high as 30% — or more!  Whereas at the time of this writing lines of credit can be had from the bank for less than 5% if you have good credit.

The scary thing is that according to an American Bankers Association May 2016 report, 42.1% of American credit card accounts have balances that are not paid off in full each month.

And it gets more scary if we ignore the accounts that aren’t being used, because then it’s just over 58.6% of active accounts are not paid off each month, compared to 49.4% that are.

So I ask you this.

Would you rather be one of the minority that saves big bucks on interest charges by paying off your credit card in full each month?

Or would you rather follow the herd off a financial cliff, joining the ones that don’t pay theirs off every month?

Obviously the ideal situation is for you avoid going over that cliff to begin with.

But keep in mind that worst case, even if you’ve already gone over that cliff, you can fix it.  That’s what this book is all about, after all.  Remember that, okay?

“Money often costs too much.”  Ralph Waldo Emerson

Think about this for a moment.

If you carry a $10,000 balance on a credit card with an interest rate of 12% you’re paying $1200 per year in interest.  If the interest rate is 30%, you’re paying $3000 per year in interest.

Now if that’s your situation, don’t let the knowledge of how much money is being wasted on interest discourage you.

Instead, use this knowledge to light a fire under you that fuels your determination to put an end to the madness now.

You can pay it off.

You really can.

You just have to start, and take it one step at a time.

Other kinds of bad debt

As you can imagine, loans used to buy things like furniture, a vehicle, vacations and electronics all fall into the bad debt category, should be considered urgent, and should be paid off as soon as possible.  All of these things go down in value with time, and aren’t likely to generate income for you that will offset what you’re paying in interest on their loans.

Your goal for bad debt

Your number one goal for bad debt is to get rid of it as soon as humanly possible.  This kind of debt is the equivalent of setting your money on fire every single day (what a waste!), and it’s needlessly increasing the financial risk you’re exposing yourself to if you can’t afford to pay it off right now.

Action Steps

  1. It’s time for a reality check.  Because you can’t fix what you don’t know is broke.

Right now, I want you to go through every credit card, every bank statement, every loan statement, every single bill you have, and find out how much debt you have.

Don’t let it depress you.  Don’t let it get you down

And although it may not feel this way, you’re tougher than that, starting now.  You’re going to be an action taker, a doer.  And you’re going to fix this.

And if by some chance it’s late at night…

… and you worry that doing this now will keep you awake all night, go to your calendar and set aside some time to do this within the next 24 hours.  I’m serious.  This is immensely important if you want to get on the road to wealth — you need to create the time to do this.

  1. Create a chart so the info is easy to read and well-organized.  For every single one of your debts, write down the following information:
  • what the debt is for (ex. Car loan, credit card, furniture loan etc.)
  • who you owe it to (ex. MasterCard, Bank of America line of credit, Ford dealership car loan etc.)
  • the interest rate
  • the minimum payment due each month
  • the remaining balance owing
  • classify it as good or bad debt based on the three criteria discussed in this chapter.

To make this job faster and easier, I’ve created a tool to track it all for you: The Debt Destroyer.  If you’d like to get your hands on it, go here to get it.

  1. Whatever you do, don’t freak out when you see the totals.  Give yourself a pat on the back for keeping it real and facing your debt head on.  This is the first step to destroying it once and for all.
  1. Put this info aside for now.  You’ll find out how to handle it in the upcoming chapters.

Summing up

I’m pretty hard core when it comes to getting rid of bad debt.  That’s why we paid off our home in under five years.  That’s why aside from the first vehicle I ever bought right after graduating with my university degree (which I should have saved up to buy without a loan, mind you), every single vehicle I’ve ever bought has been paid for in cash.  And I avoid credit card debt like the plague.

Look, if you can’t sell everything and pay it all off right this minute, your bad debt is a massive freaking emergency and needs to be paid off as soon as humanly possible.

And if you could theoretically sell everything you own to pay off your bad debts, but it would cause you undue hardship to do so, it’s merely a regular emergency.  But seriously, do you really want to live with a potential financial emergency every single day?  I think not.

Look, if you have bad debts, you need to get rid of them asap.  Period.  And that will open up a world of possibilities for growing your wealth and creating a prosperous financial future.

Next, we’re going to talk about mortgages and whether it’s good or bad debt.  It’s typically one of the largest debts that any of us ever have, so it’s important to stick it in the right category so you know what to do about it.

P.S. If you’re renting, you still need to read this chapter.  Because the conclusions drawn about how much of a monthly mortgage payment is affordable also applies to monthly rent.