What Is an Annuity?

Annuities are contractual financial products issued by an insurance company that provide a steady stream of payments over a predetermined period. These products primarily serve as a dependable way to secure income during retirement if you don’t have a sizable pension or another source of income. Annuities can also be found in the form of structured settlements, pensions, and lottery winnings.

Types of Annuities

Fixed Annuities vs. Variable Annuities

The primary difference between fixed and variable annuities deals with whether or not dollar amounts will fluctuate from payment to payment.

In the case of a fixed annuity, every periodic payment is a set, unchanging amount. These types of annuities allow individuals to count on a consistent payment, which will remain the same every time.

Variable annuities, on the other hand, involve payments which can vary based on the performance of the fund’s investment portfolio. If the investment is performing strongly, annuity owners will see greater returns. However, if the investment is not performing well, one might experience lower payment amounts than they are used to.¹

Annuity Payout Options

Deferred vs. Immediate

Broadly speaking, there are two primary classifications of annuity payout options: deferred and immediate. This determines when the annuity holder will begin receiving payments.

As you are making payments into a deferred annuity policy, the insurance company invests the money, generating interest and growing the account. Once you retire, you receive this money in the form of regular payments, supplementing social security and any other retirement investments you may have made. Deferred annuities may carry a buyout clause. This stipulation allows the annuitant to cancel the annuity early and receive a lump sum. However, this clause often involves an early withdrawal penalty.

Conversely, immediate annuities are those which have no accumulation period. This means that annuity payments will begin within one year of paying the initial premium to the insurance provider.¹ Generally, you can only purchase an immediate annuity with a single lump sum, as opposed to small investments made over time. Because these annuities start paying out right away, they generate a smaller amount of interest. However, this also makes them a popular option for those already close to retirement.

Once you begin receiving payments, companies may not allow you to withdraw your lump sum. However, Peachtree can provide you a lump sum by buying your future payments.

Common Annuity Products

Retirement Annuities

Mutual fund companies, large banks, and investment firms offer retirement annuities to people who want to ensure that they have a dependable source of income upon retirement. During their careers, people that elect for this kind of plan deposit a portion of each paycheck into their annuity fund, which accrues interest until retirement.

Inheritance Annuities

Annuitants can sometimes designate an heir to receive their payments if they were to pass away. This often involves a modification of the policy to add a death benefit rider, which enables a beneficiary of the policy to recover the amount the annuity owner paid for the contract, minus any funds previously withdrawn. This can help to limit risks associated with variable annuities and life insurance policies.

Lump Sum Options for Annuities

Annuities are used in a wide array of applications and meant to provide a steady stream of income for the recipient. Sometimes, however, annuities can prove inflexible. Many contracts come with restrictions or penalties that can either limit your ability to make withdrawals from them or make the prospect highly unappealing.

If receiving payments over time no longer meets your needs, Peachtree can help you sell annuity payments for a lump sum of cash.

What Are My Annuity Sale Options?

Thanks to our vast experience, the process of selling your annuity payments is straightforward and relatively fast. When considering selling your annuity, it doesn’t have to be all or nothing — we can buy a portion of payments, a period of payments, or buy the full amount (sometimes referred to as an annuity cash out). This all depends on your unique financial needs.

In most cases, these are the different routes that we can take:

Sell a Period of Payments

The buyout of a period of payments involves selling all payments during an agreed-upon amount of time. Once the period in which you’ve decided to sell your payments has passed, you will continue receiving your annuity payments as you were before the transaction.

Sell a Portion of Payments

You can also elect to sell a portion of your annuity, which is sometimes referred to as a partial buyout. In the case of a partial buyout, Peachtree will take the designated amount from your monthly payments each time you are scheduled to receive one, and you will continue to receive the rest.

Selling All of My Payments

If you decide that a lump sum amount is more valuable to you now than parceled out payments over the course of your annuity, you can choose to sell all future payments in a complete buyout. In this scenario, we will determine the full value of your annuity and make an offer to buy all remaining payments. You will receive your lump sum of cash in a one-time payment, and we will collect the scheduled annuity payments that you would have received over time.

What Is the Process for Selling Annuity Payments?

Peachtree’s team simplifies the selling process of your future annuity payments. Below, we outline the step-by-step process of cashing your annuity payments as soon as possible.

1. Speak with a representative to receive a free quote. This can often be provided within the same day.

2. Select an option that works for your needs.

3. We gather all the necessary paperwork to finalize the sale, including: a signed copy of your Annuity Contract; a signed contract where you authorize us to complete the sale; and Change of ownership or payee/beneficiary forms (if required).

4. You sign the sale agreement.

5. The insurance company issuing your annuity or structured settlement payments approves policy changes. In some cases, your annuity payment sale may require court approval. If that is the case, your Peachtree representative will advise you of the necessary steps to complete that process. 

If you need money sooner, you may be eligible for pre-settlement funding that can help with urgent expenses. 

6. You receive your money via an electronic transfer of funds or a physical check to spend however you like. This process can take anywhere from 30 to 90 days, and it’s based on a variety of factors according to individual state laws.