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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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.

The secondary market for annuities has only been around for a couple of years, but it offers a wealth of benefits for annuity investors.  According to J.G. Wentworth’s “New Opportunity: The secondary market for annuities creates new options for you and your clients,” a secondary market annuity might be the right choice for many people.  If you own an annuity, this market can help you liquidate.  It also boosts the insurance industry as a whole, including helping agents and brokers.  Financial advisers can increase their revenues, better help their clients, and increase their marketing with the secondary annuity market.

There are five steps that will occur in a typical secondary market annuity sale.  First, an insurance agent or broker sends an annuity contract to the finance firm that may purchase the annuity through a brokerage general agent.  Next, the finance firm sends purchase options back.  The investor and their adviser determine what option is best for selling their variable or fixed annuities and respond to the finance firm via the brokerage general agent.  The finance firm then lets the insurance company know that the purchase has been completed.  Finally, the investor will receive their proceeds in two to four weeks after the agreement is finalized.

According to Business Week article “Annuity Exit Strategies: Thanks to a nascent secondary market, it is becoming easier to cash out your policy,” annuities have become more like mutual funds, stocks, and bonds.  Many investors worry that they are stuck with their annuities, especially if they are already receiving payments or the annuities are deferred.  Secondary market annuities give investors the ability to either sell or cash in annuities that they no longer need monthly.  Some investors need a lump sum payment with their investment as they find out their financial situation has changed.  The American Council of Life Insurers said that a quarter of annuity holders are worried that they would not be able to liquefy their annuity if the need arose.

Met Life, Prudential, and many other companies are purchasing unwanted annuities, packaging them into asset-backed securities, and selling those securities to institutional investors.  Selling a secondary market annuity is complex so it is crucial that you speak with an insurance expert to ensure your deal is a solid one.  There are a few types of annuities that won’t qualify for the secondary market, including a life-only immediate annuity.  The price you receive for your annuity is based on the annuity value, the length of time you were to receive your payouts, and current interest rates.  The most common annuities sold in the secondary market are lawsuit settlements and lottery winnings, but many kinds of annuities are eligible and are sold for an array of reasons.