Why It Makes Sense to Convert Annuities into Cash?

FinanceTube • January 10, 2013 • 5 Comments

Today I will be talking about why it makes sense to convert annuities into lump sum of cash. The easiest way to understand an annuity is to think of insurance in reverse. Instead of making monthly payment premium to an insurance policy and a lump sum upon your debt, you instead receive a large sum of money up front for receiving payments over time. The difference of an annuity from a cash settlement resulting from personal injury or any other type of law suit is that it will not be you for putting up a lump sum of cash to purchase the annuity. It will be the person or company that owes you money.

There are two basic types of annuities. A term certain annuity will guarantee you an income of the recipient that last for many years. Usually it pays a schedule amount until the individual is 90 years of his age. If all payments are not being paid up before death the remaining payments or the lump sum will be made to the state.

A life annuity will start up to pass a specific amount every month, quarter or year till the recipient dies. At that time the payment stops however there are other options that can add to a life annuity policy that could change this.

Everyone goes through changes during their life time and when your personal and financial needs dictate a change an annuity can be worth selling. During this time it might makes sense to convert these annuity into a large sum of cash. To either diversify the investment, gift your children or to any other goal, whatever the settlements real estate’s notes and other financial vehicles in to cash is easy when performed by an experienced professional. Just be sure to make out a fully informed decision on how much the policy is worth.