No matter how well you plan your financial future, obstacles may arise that require you to pivot. While guaranteed income makes annuities an attractive option, cashing out an annuity can help deal with the unexpected.
Read on to learn how to sell annuity payments, the pros and cons, and expert tips to guide your decision-making.
Yes, there are ways to sell your annuity payments — here are the most popular methods.
A full sale of an annuity means selling the entire remaining value of your annuity payments in exchange for cash. This option is ideal if you need a large amount of money quickly, such as for medical expenses, debt repayment, or a major investment. However, selling your annuity in full means you give up all future payments, so you’ll no longer have a steady income from the annuity.
A lump sum sale of your annuity payment gives you more control than a full one. With this option, you decide on a specific dollar amount to receive in exchange for the equivalent number of payments.
Say you need $15,000 to pay for your child’s education — you could sell the number of annuity payments that equal that amount. You’ll still receive the payments you haven’t sold, meaning your annuity remains a source of guaranteed income.
A partial sale is a broader term that can include lump sum sales, but it may also refer to selling a percentage of each future payment rather than a fixed dollar amount. For example, instead of selling $15,000 worth of payments upfront, you might sell 50% of each monthly payment for a set period while keeping the remaining half.
Most likely, you purchased your annuity with the intention of building long-term security — but selling payments or withdrawing funds early doesn’t mean you’ve failed. Having an annuity as a fallback to cover a life event provides peace of mind and a layer of safety. Here are some primary benefits selling your payments can offer.
Unexpected expenses can arise at any time, whether it’s a tuition payment deadline or the need to arrange long-term care for a loved one. When financial challenges disrupt your original plans, accessing cash from your annuity payments provides a practical solution. Selling some or all of your annuity payments lets you address urgent costs, maintain financial stability, and adapt to changing circumstances without unnecessary strain.
Accessing cash from your annuity through a full, partial, or lump-sum sale can be a strategic way to pay off outstanding debt. High-interest debt may quickly erode savings, and sometimes, it’s wiser to handle it quickly instead of indefinitely paying excessive interest. By converting annuity payments into immediate cash, you can reduce debt burdens and feel more stable moving forward.
Reinvesting the proceeds from selling annuity payments can provide opportunities for positive life changes or greater growth. By using those funds to pursue a more lucrative investment, you can potentially enhance your overall financial position. For example, the proceeds may free you to seize a great real estate opportunity or invest in a diversified portfolio of stocks and bonds that offer higher growth potential.
Despite the appealing advantages of annuity sales, here are some disadvantages worth considering before making any big decisions.
Treating annuity earnings as a readily-available source of cash can also lead to risky spending habits if you’re not careful. Wanting to take that dream vacation is very different than needing to pay for a parent’s long-term care. If you want to sell payments, only do so thoughtfully and strategically.
Just like prematurely selling an IRA or 401(k), cashing out an annuity can derail your financial plan. Most long-term financial planning options require time to reach their full potential — so if you interrupt or derail progression, you could risk meeting financial goals like building security for retirement or leaving money to loved ones.
No matter how you choose to sell annuity payments, you’re giving up future income, which is the overarching purpose of an annuity. Additionally, if you sell all of your annuity payments, you might only receive a fraction of their anticipated future value.
After you’ve carefully considered the pros and cons of selling annuity payments, follow these four tips to determine the best strategy for you moving forward.
Always consult a trusted financial advisor before making changes to your annuity agreement. They can guide your choices about selling methods and explain important tax implications. And if they think selling payments is unwise for you, they’ll help you construct an alternative plan to generate the cash you need.
Research multiple companies that buy annuities, and look into their reputations through a reliable source like the Better Business Bureau. If a potential buyer is affiliated with an insurance company, consult the National Association of Insurance Commissioners. You can also check with the Consumer Financial Protection Bureau or the Financial Industry Regulatory Authority BrokerCheck platform to review any consumer complaints and regulatory actions.
Once you find a selection of annuity buyers you feel comfortable with, compare their offers and analyze the terms. Quotes should be free, and the offers should be clear and detailed.
When reviewing offers, look for the discount rate. When an annuity buyer determines what they’ll pay you, they factor in a discount rate to calculate the present value of your future payments. This rate represents the difference between your annuity’s value over time and what you’ll receive for it in a lump sum if you sell annuity payments prematurely. As a trade-off for accessing your annuity cash immediately, you receive a reduced payout based on this discount rate — meaning the lower the discount rate quoted, the more cash you’ll receive.
Other factors may impact how much you can sell for, including the total number and value of the payments you’re selling and current economic conditions.
Once you’re comfortable with an offer, review the terms again carefully, including any fees and conditions. Specifically, you want to pay close attention to clauses that will affect future annuity payments. After the buyer processes and approves the paperwork, you’ll receive your funds as agreed.
Expect the process to take about 1–3 months, depending on the annuity's complexity and the buyer's procedures. Some annuity buyers offer a cash advance while you wait, but this may come with additional fees.
Generally, the IRS treats the cash you receive from selling annuity payments as taxable income. Consult a tax professional to understand how selling your annuity might impact your tax obligations.
Compare quotes to secure the best deal. Typically, you should receive around 50–80% of your annuity’s cash value. The exact amount depends on factors like the discount rate, annuity type, payment schedule, and remaining payout period. Typically, the longer your annuity’s remaining term is, the larger your sale payout will be.
This communication is for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice.
