How to Know if an Annuity No Longer Fits Your Needs
Annuities can be great products. They provide a lifetime income stream for you when you retire or when you receive money as part of a settlement. However, annuities aren't always the best product for everyone. Annuities can be problematic when you need a lump sum of cash for one reason or another. How do you know if your annuity no longer fits your needs?
Do You Have Major Life Events That Require A Lot Of Cash Right Now?
If you need a lump sum of cash right now, try cashing out annuity payments with a funding company. It's hard. You have to convince a court that cashing in your annuity serves your long-term best interest. That might seem like an easy thing to do, but it's not. One of the best reasons for cashing in an annuity is to fund major life events though.
Let's say that you have no savings to pay for long-term care insurance, money to help your grandchildren, or even money to help your children. All of these reasons can be excellent reasons for cashing in annuity payments.
What you'll have to do is show that you'll be better off by having the lump sum cash rather than the ongoing payments. You might argue, for instance, that you don't need some of your monthly payments, but that your son or daughter needs money right now for emergency expenses. Maybe he just lost his job and needs to come live with you.
You need to raise cash quickly to help him pay for moving expenses and to renovate the house before he comes to stay with you.
Do You Have Major Debts To Pay Off?
It's becoming more and more common for people to retire with a huge debt load. Debts don't just disappear because you retire. Mortgages, car loans, and even credit card debt is very common for people over 65.
Why? Because you're living on a fixed income, yet you still need to pay for many things you've been buying your entire life. Simple things like eyeglasses or a new dishwasher can start a snowball effect on a credit card - before you know it, you're thousands of dollars in debt.
Cashing in an annuity payment might be just what you need to extinguish those interest payments and get out from under your debts.
Do You Want To Take More Vacations?
While some financial professionals advise against cashing in annuity payments, you might want a lump sum of money so that you can spend your "golden years" traveling the world, sitting out in the sand on the most luxurious beaches, and experiencing all of the things you never had time (or money) for when you were younger.
Annuity payments can really hold you back, especially if these payments are quarterly, and stretched out over your lifetime. If you've got enough coming in from Social Security and your private IRA, you might not even need that pension or those annuity payments from that personal injury suit.
Anthony Jensen has extensive work experience in personal finance. He enjoys helping others better understand their financial options.
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