Annuity FYI Blog

In “Pre-owned annuities deliver return with minimal risk,” Elliot Raphaelson of The Chicago Tribune says that secondary market annuities can be a good investment for some people.  Although they aren’t right for everyone, they offer both a safe investment and a high rate of return.  With low annuity rates based on low market interest rates right now, an annuity purchased from a previous owner can pay you up to 6.75%.  Sometimes people who have won an annuity settlement or inherited an annuity want to sell the guaranteed monthly payments for a lump sum of money today.  Intermediaries work with the seller and purchaser to transfer the annuity to the reputable life insurance company or other highly rated annuity carrier.

By taking into account the balance of the payments remaining, the interest rate of the annuity, and the number of payments that remain; a present value of the annuity is determined.  The purchaser pays a lump sum to the original annuity owner and the intermediary gets a fee as well.  The large discount you can get on a secondary market annuity is probably the greatest benefit to purchasing one.  As of December of 2011, MetLife was offering a 6.75% interest rate for a 50 year annuity.  The two disadvantages listed for purchasing this product are the loss of liquidity and the potential that you could lose out if interest rates increase while you are locked into this annuity.  Those are choices made with many annuity purchases and often, investors decide that they are worth the security and advantages of an annuity.

Written by Rachel Summit

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If you have any questions or interest in a secondary market annuity, you can get a FREE guide from Annuity FYI.  We have been talking about secondary market annuities for awhile now because they can have fixed compounded effective yields up to 7.75%.  The Secondary Market Income Annuities Buyer’s Guide will answer your questions and give you a plethora of information on the products.  The guide is free to all visitors of Annuity FYI’s website, so sign up here for our SMA Buyer’s Guide if you’d like one.

Secondary market annuities come about when someone who has won money to be distributed through an annuity decides to sell their future annuity and receive a lump sum payment in the present.  You can purchase that annuity at a discounted price and receive the future payouts when the guarantee period is up, sometimes immediately.  These fixed annuity rates tend to be much higher than the rates of other fixed annuities, variable annuities, bonds, or CDs.  Find more information on secondary market annuities in the SMA Buyer’s Guide.

Secondary market annuities have been around for 15 years, allowing investors who need or want to sell annuities to do so.  In “Don’t want that annuity anymore? You can sell it,” Vanessa Richardson of Bankrate discusses this market.  J.G. Wentworth estimates that there are $50 to $100 billion of annuities annually that can be sold in the secondary market.  They say that the past two years have really seen an increase in investor interest in these annuities.  They get much more control over their annuities with the ability to sell them for a lump sum of cash or payments over time.

Annuities are usually used for retirement income purposes, with over $200 billion sold each year.  In the secondary market, annuities are packaged together and sold to large institutional investors most often.  Investors who want to sell their deferred or immediate annuities do so for many reasons.  They may have inherited an annuity that wasn’t what they desire in investment terms, changed their investment or tax goals, had a financial emergency, or realized they are not happy with their annuity.  The secondary market is also good for people who don’t want to sell all of their annuity because you can sell part of it and keep the remaining payments.

In the PR Web press release “Annuity FYI Endorses Secondary Market Annuities, With Rates as High as 7.75%,” secondary market annuities are said to be better investments than most fixed indexed annuities.  In a market with current low interest rates, they rival traditional fixed annuities, equity linked CDs, and bonds.  The one-time investment usually ranges from around $40,000 to $500,000 and can get an interest rate around 7.75% currently.  The investor can receive their payments periodically or in a series of lump sum payments over time from established and dependable companies like John Hancock, MetLife, and Prudential.

A current $50,000 investment in a secondary market annuity from Transamerica would repay an investor $300,000 over the course of 24 years, yielding 7.75%.  There is a comparison table and access to expert help on this Annuity FYI website.  You can also sign up for weekly emails to inform you of the most recent good investments.  Many investors don’t even know what secondary market annuities are, even though they can be such a valuable investment product.  Speak with an expert via phone or internet and see if this investment works in your portfolio.

In a follow up to last week’s blog about the process of selling an annuity in a secondary market, here is some additional information about secondary market annuities.  From JG Wentworth’s article “New Opportunity: The secondary market for annuities creates new options for you and your clients,” Michael Vaughan discussed this unique business opportunity.

There are many reasons why annuity owners might want to sell their investment.  Any change in one’s financial plan, whether it be your retirement strategy or your overall investment strategy, may warrant an annuity sale.  It is also possible that someone who inherited an indexed annuity or another annuity product may not have the same investment strategy as the person from which they inherited the product.  Other reasons someone may want to sell their annuity include any need to liquefy whether it be for medical expenses or a large purchase.

The secondary market for annuities allows the client/adviser relationship to be strengthened.  Advisers can offer their clients new options financially that they might not have had if they were unhappy with their annuity.  New business opportunities and improved marketing for advisers leads clients to receive better one on one treatment that offers them many benefits and opportunities for new products and investments.  This market is good for the insurance industry as a whole as well as the clients that are able to use it.