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Rezo Bragin
Rezo Bragin

Companies That Buy Out Annuities

In the years running up to the recent financial crisis, many insurance companies offered variable annuities that included generous benefits. Some of these offers promised the benefit of paying contract owners a minimum amount each year, even if the financial markets declined. Others promised minimum death benefits if a contract owner passed away. However, some insurance companies are now reconsidering those benefits because of the high cost to maintain them in the current economic environment.

companies that buy out annuities


Caution: Insurance companies may make buyout offers because it is in their own best interest to do so. The insurance company does not make a buyout offer solely based on a determination that it is in your best interest.

You should accept a buyout offer only when you determine, after knowing all the facts, that it is better for you to accept the buyout offer rather than continue to own your variable annuity with a particular benefit.

Be aware that the amount of the offer (the amount by which your contract value or cash surrender value may increase if the offer is accepted) may fluctuate. You should contact the insurance company or your investment professional to determine the current value of the buyout offer.

Likewise, a decline in the financial health of the insurance company may cause you concern that the insurance company might not be able to make payments to you in the future. This may make long-term promises from the insurance company less attractive.

If there has been no change in your personal situation or that of the insurance company, you should question whether accepting the buyout offer is right for you. A lump sum payout or an increase to the value of your contract may be attractive, but consider whether that outweighs the benefits provided by the variable annuity.

Transferring cash surrender value to a different financial product (which may be another variable annuity) may trigger a new sales charge or subject you to a new surrender charge period. Also, new financial products, including variable annuities, offered in the current economic environment may have higher fees or be less favorable than the benefits offered by the variable annuity you currently own.

An investment professional may be able to help you better understand the pros and cons of a buyout offer. However, be aware that they may receive a commission for selling you a new annuity or for persuading you to accept the buyout offer. You should ask them to disclose any conflicts of interest that they may have.

Caution: Investment professionals may be directly or indirectly compensated if an owner of a variable annuity accepts a buyout offer. Some insurance companies offer financial incentives to investment professionals if their clients accept a buyout offer. Similarly, if an investment professional is compensated based on the value of the assets managed, then acceptance of a buyout offer or reinvesting the proceeds from a surrendered variable annuity may lead to increased compensation for the investment professional.

If you have an annuity or structured settlement and are interested in selling your payment rights in exchange for a lump sum payment, there is a market full of companies, aside from us, that are seeking to do business with you.

An annuity is a contract between you and an insurance company. You buy the annuity by making one or more premium payments to the insurance company. The insurance company makes income payments to you, for life or for a limited time. Annuities usually have commissions and other fees that cut into your investment. They typically earn less money than stocks and bonds. Most people who buy an annuity do so to get an income when they retire. An annuity is a long-term investment. Make the decision carefully.

We do not recommend or disapprove of annuities. We want to give you the information you need to make the best decision for you. There are laws in California that protect the rights of seniors. You have the right to be treated fairly, with honesty and good faith.

Variable Annuity: The insurance company invests your annuity in stocks, bonds, or other investments, based upon the risk you want to take. If the fund does not do well, you may lose some or all of your investment. For more information on variable annuities, read the brochure Variable Annuities: What You Should Know at

Fixed Annuity: Your money earns interest at rates set by the insurance company (or in another way described in the annuity contract). The interest rate may be set for only 1 year or for up to 10 years. An Equity-Indexed Annuity has an interest rate that is usually based on a stock market index.

Watch out for fixed annuities with a minimum guaranteed interest rate of 0%. You will not lose principal, but your money will not grow. Also, you will not get all the extra interest that the stock market might earn. The insurance company decides how much you get.

You can't take any money out in the first year. After that, you may be able to take out some money without a penalty. If you take more, the surrender charges can be high. You may end up with less money than you started with.

Selling settlement payments may help resolve an urgent financial issue, but is not a decision that should be taken lightly. Carefully examine options before moving forward. If you decide to sell, choose a structured settlement buyer after thorough research. With the right buyer, you can receive the cash you need at a fair price, instead of having to wait for your settlement payments over a long period of time.

With this guide, you should better understand the process of selling settlements and strategies to avoid rash decisions that will negatively impact your financial future. Taking your time in the process can help ensure you receive a fair lump sum with minimum hassle.

You do not have to be at retirement age to receive your annuity payments, but people typically purchase an annuity with retirement in mind because it can help assuage fears of outliving your savings. But annuities are not to be confused with pensions, a benefit an employer may offer that requires you to reach retirement age before you begin to receive payments. Pension benefits are becoming increasingly uncommon, so annuities are an appealing option to those who want to receive regular payments in retirement.

Because withdrawals can be costly, many annuitants opt to sell their payments to companies like JG Wentworth to avoid complicated, expensive fees and penalties. This allows them to skirt around the illiquidity of their annuity assets and get their cash on their terms, when they need it.

Set up to grow and disburse on a tax-deferred basis. Although typically these annuities are structured to ensure income during retirement, you can choose the age that you would like your disbursements to start.

A tax-advantaged annuity that is purchased with pre-tax dollars, such as rolled-over funds from a 401(k) or 403(b) plan, a traditional IRA, a Simplified Employee Pension plan, or other tax-exempt savings plans. You pay taxes on any disbursements from this type of account.

Consumers are on pace to buy almost $300 billion of annuities in 2022, which would handily beat the $265 billion purchased in 2008, the current annual record, said Todd Giesing, assistant vice president of Limra Annuity Research.

Fixed-rate deferred annuities work like a certificate of deposit offered by a bank. Insurers guarantee a rate of return over a set period, maybe three or five years. At the end of the term, buyers can get their money back, roll it into another annuity or convert their money into an income stream.

Meanwhile, consumers are shying away from variable annuities, the performance of which is generally directly tied to the stock market. Sales are on pace for their lowest year since 1995, according to Limra.

These are for retirees seeking a guaranteed, pension-like income each month for life. Payouts from immediate annuities start right away, while those from deferred-income annuities starts later, perhaps in a retiree's 70s or 80s.

"Am I worried about the client running out of money? If yes, that's when I think about an annuity," said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners, based in Jacksonville, Florida.

McClanahan, a member of CNBC's Advisor Council, doesn't use single-premium immediate annuities or deferred-income annuities with clients who have more than enough money to live comfortably in retirement. Annuities become more of a preference for those in the middle, who are likely but not necessarily going to have enough; for them, it's more of an emotional calculus: Will having more guaranteed income offer peace of mind?

Single-premium immediate annuities and deferred-income annuities are relatively simple to understand compared with other categories, advisors said. The buyer hands over a lump sum to the insurer, which then guarantees a certain monthly payment to the buyer starting now or later.

By contrast, consumers can't get back principal when they buy single-premium immediate annuities or deferred-income annuities. This is one likely reason consumers don't buy them as readily, despite their income efficiency, Giesing said.

From a behavioral standpoint, protection-focused annuities may make sense for someone five to 10 years away from retirement who can't stomach investment volatility and is willing to pay a slightly higher cost for stability, Baker said.

But Baker cautioned that value proposition likely doesn't make sense for investors any more. It would effectively lock in big stock and bond losses, and then cap gains to the upside for the term of the insurance contract, he said. Investors can now get a return over 4% on safe-haven assets like shorter-term U.S. Treasury bonds (a 3-month, 1-year and 3-year, for example) if they hold those bonds to maturity.

In addition, the rule requires that firms conduct surveillance to determine if any associated person is effecting deferred variable annuity exchanges at a rate that might suggest conduct inconsistent with FINRA Rule 2330. Firms must also have procedures to implement corrective action to address any exchanges and conduct that violate FINRA Rule 2330. 041b061a72


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