Should You or Should You Not? The Annuity Conundrum

Selling your annuity

Should you sell your structured settlement annuity? It is a question that needs some consideration. Selling an annuity settlement may solve some cash problems you have in your immediate future, but may short-change you in the long run. It comes down to taking a hard look at your money issues today, and doing your best to forecast for what may come later.

Death and Taxes (and More Taxes).

One fact that works against keeping a structured settlement annuity is the taxes upon it. No one likes paying taxes, even when they go towards Social Security or the national defense budget. Taxes on an annuity are likely to be more annoying, as the payment is because the court ordered it for a personal injury claim. The term “adding insult to injury” seems applicable, even though the maximum tax rate is 3% on a structured settlement annuity.

When Can I Get Paid?

Some annuities can begin payout 30 days after being awarded in court. The claimant can then set up a payment schedule over 10 to 20 years, depending on the amount. They can also set things up to be paid out for another specified period of time, such as a spouse’s expected life span.

Lump Sum Versus Annuity.

If you have decided to sell your structured settlement annuity, you have chosen to give up the total sum paid out over a period of time for a lump sum now. It does make sense for some people who may be experiencing financial difficulties now. Some problems need immediate change, and cannot be solved with slow progress. Medical bills, a mortgage payment to avoid foreclosure, or debt are all sources of stress. To be free from the stress does drive many claimants to seek an immediate payout. The choice is, of course, yours. If the financial problems of today are so severe that there is no relief in site, selling your structured settlement annuity may just be the smartest choice.

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Laura

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