Selling Your Annuity Payments: How It Works, What You’ll Get, and Smart Alternatives

Selling Your Annuity Payment: Is it a Good Idea?

Annuities are powerful insurance products that can complement your retirement savings. Most notably, they can provide a guaranteed lifetime income stream in retirement. They’re intended as a long-term financial product. So, once you put money into an annuity, it’s usually not very accessible.

But what if your financial situation changes? Is your money locked away forever?

The answer is no. The good news is that you can get cash for annuity payments if you really need to.

In this article, we explain what it means to sell your annuity and how it works. We give you some examples of when selling your annuity is a good idea and when it isn't.

Just to clarify: This article is about selling an annuity you've already purchased. It's not about becoming an insurance agent or starting a career in annuity sales!

How To Sell Annuity Payments (Step-by-Step)

• Confirm eligibility with your carrier and contract. Qualified annuities inside IRAs/401(k)s generally cannot be sold; some contracts prohibit assignment.
• Decide what to sell: the entire contract, specific years of payments, or a portion of each payment.
• Get multiple quotes from reputable buyers; compare net proceeds after fees and any required court/insurer approvals.
• Review taxes and impact on benefits with a licensed professional (and attorney, if required).
• If applicable (e.g., structured‑settlement payments), obtain court approval per your jurisdiction before transfer.
• Complete transfer paperwork; the buyer coordinates with the carrier to redirect payments once approved.

Ways to Sell Annuity Payments

An annuity is a special kind of life insurance product. When you buy an annuity contract, you pay money to a life insurance company now. In exchange, you receive periodic payments in the future. Selling your annuity means giving up the ability to receive a stream of payments from your insurer in the future. You are exchanging those future payments for a chunk of cash now.

So if you need the money now, who would buy your future annuity payments from you?

There are a number of companies that specialize in buying annuities from individuals. These companies offer you a lump-sum payment now in exchange for the future payments. You can choose to sell your annuity in its entirety or in portions.

Here are the three ways you could potentially sell your annuity:

1. Sell Your Entire Annuity

If you choose to sell your entire annuity, you are completely liquidating the asset. That means that you’ll receive a single lump-sum payment now from the annuity buyer. It also means that you won’t receive any future payments from your annuity.

2. Sell a Portion of Future Annuity Payments

You might choose to just sell a part of your annuity. For example, you could sell the first four years of your annuity payments. In this case, you’ll get a lump-sum payment now. Then, once the annuity starts to pay out and the first four years have elapsed, you’ll begin to receive the rest of the periodic income payments owed to you.

3. Sell a Portion of the Dollar Amount of Future Annuity Payments

You can also opt to sell a portion of the dollar amount you would receive in future payments. For example, let’s say you were to receive payments of $1,000 each month. But you decide to sell a $300 portion of each future payment. In this case, you would receive your cash now for the sale of the $300 portion. In the future, you would still receive your annuity payments, but they would only be $700.

How To Sell an Annuity

Selling an annuity can be kind of tricky, and the process may vary depending on the type of annuity you have. However, the selling process typically works like this:

• Research annuity sales companies. Look for companies that have a history of good service and good independent reviews.
• Receive a quote. The company will provide a cash offer for your annuity payments. It usually takes only a few minutes to receive the offer, but it could be longer if you’re selling a more complex annuity.
• Consult with an expert. Typically, it’s a good idea to review the offer with a qualified financial advisor who’s an expert in annuity sales. This will help ensure you receive a fair deal.
• Complete the paperwork. You'll have to sign a number of forms including a contract with the annuity sales company. Be sure to review all the paperwork carefully before signing.
• Receive your money. It usually takes a few weeks to a few months to complete the process and receive your money. Some companies may offer a cash advance.

Selling vs. Withdrawing from Annuities

Selling annuity payments is an alternative to withdrawing from your annuity early. When you withdraw from an annuity, you access your own money; there is no exchange of assets. In contrast, when you sell an annuity, you transfer your annuity payments to a new buyer. In exchange, they pay you a certain amount of money.

Selling an annuity may be preferable to withdrawing from an annuity early. But it’s best to weigh the costs and benefits. Each annuity has a surrender period that lasts for a specific amount of time, shown on your contract schedule page. If you withdraw during this period, you may owe surrender charges.

If you withdraw prior to age 59.5, you may also wind up paying government tax penalties. All of these fees are to deter you from making early withdrawals.

Note that you may be able to make penalty-free withdrawals from your annuity up to a certain amount. Check your annuity contract for terms.

When you sell your annuity, the annuity buyer usually pays you less than your future annuity payments are worth. This is because the company is buying your annuity to make a profit. Additionally, there are often sales fees and sometimes legal fees associated with selling your annuity. And don’t forget that the cash you earn from the transaction will count towards your income, and you will owe taxes on it. Together, the cost of selling an annuity is usually quite high.

What Types of Annuities Can I Sell?

Companies buy many different types of annuity products.

Most companies will buy immediate annuities (often called "single premium immediate annuities" or "SPIAs"). It's also fairly straightforward to sell a deferred annuity—either while it’s still accumulating or after annuitization.

Most companies buy fixed annuities, including the common multi-year guaranteed annuity (MYGA). Companies tend to be a little less inclined to buy variable annuities or fixed indexed annuities, but some do. This is likely because variable and fixed index annuities are more risky. Both of these annuity products incorporate stock market performance into the calculation of their interest rates.

Keep in mind that if your annuity is part of a pension plan or IRA, you typically cannot sell it. You also usually cannot sell other types of regular payments like social security payments, child support payments, 401(k) distributions, or payments from divorce settlements.

If payments come from a structured‑settlement annuity, a court order may be required to approve the sale before your carrier redirects payments.

How Much Will You Receive When Selling Your Annuity Payments?

Selling an annuity is a business deal. There’s no set price; you will negotiate your annuity’s price with the buyer. That means the price is partially up to you. Remember though, these companies are looking to profit, so you will usually receive less than the total value of your annuity. You also want to consider the following factors that may affect your take-home value.

Consider the Taxes on Selling Your Annuity

When you sell your annuity, you'll receive a cash payment. That payout counts as regular income, and you’ll have to pay income taxes on it in the year you receive it.

Consider the Discount Rate

Companies that buy annuities apply a discount rate to the value of the annuity. The discount rate decreases the estimated value of the annuity. It is a type of fee. The higher the discount rate, the higher the fee, and the less money you will receive.

With a lower discount rate, the lower the fee, and the more you will receive for your annuity. Companies largely determine discount rates by predicting future interest rates. If you're curious, you can actually use a formula to calculate the value of your future annuity payments. This is called calculating the present value of an annuity. It can give you an idea of what your annuity might be worth to a buyer.

Tip: Ask buyers for both the gross discount rate and your net proceeds after every fee. Compare multiple quotes.

When Is Selling Annuity Payments a Good Idea?

It’s typically not a good idea to sell an annuity unless you have to. Selling an annuity has some benefits, but it also has many drawbacks.

Benefits of Selling Annuities

• Immediate cash. The main benefit of selling your annuity is that it provides you with a quick source of cash. If there's an emergency and you need to quickly raise some capital, selling your annuity is one way to do that.

Drawbacks of Selling Annuities

Losing money. Companies buy annuities to make a profit. When you sell your annuity, you usually earn much less than the annuity’s real cash value.

Taxes. The payment you receive will count as regular income. You will have to pay taxes on it in the year you receive it. If that extra income pushes you into a higher tax bracket, you’ll have to pay a higher income tax rate on those funds.

Lower‑Cost Alternatives to Selling

• Use contract features first: free‑withdrawal amount, hardship waivers, or nursing‑home waivers (if available).
• Partial surrender (check surrender charges/MVA) or reduce optional riders you no longer need.
• 1035 exchange to a different annuity (tax‑deferred) if your goal is better features—not cash out.*
• Borrow elsewhere at a lower cost if appropriate; compare APR vs. sale discount rate.
• Annuitize only a portion to create reliable income for essentials and leave the rest invested/liquid.

* A 1035 exchange does not give you cash today; it’s a tax‑deferred transfer to a new annuity.

Does Canvas Annuity Buy Annuities?

No, we don't. At Canvas, we specialize in selling simple, straightforward, low-risk fixed annuities with competitive crediting rates.

While we don't buy annuities, we do offer fairly flexible withdrawal options on our annuities. Our Flex Fund even lets you get your initial premium back at any time (minus any prior withdrawals) without paying surrender charges. Flexible withdrawal options (like the ones we offer at Canvas) help people avoid the need to sell their annuity.

Talk to A Financial Advisor Before Making a Decision

Selling an annuity gives you some quick cash if you need it. But when you sell, you can lose a lot of the value of your annuity. Therefore, consider the decision carefully. You may wish to consult with a financial advisor to help you make the right decision.

And when you’re deciding, don't forget to factor in the benefits that an annuity gives you. It's the only product that can offer guaranteed income in retirement, not to mention its tax-deferral benefits. These factors make annuities an invaluable addition to your portfolio and help alleviate anxiety around retirement planning.

Want to learn more about the benefits of annuities and how they can help you prepare for retirement? Reach out to our licensed reps! They're friendly, knowledgeable, and happy to help.

The information in this article is accurate as of September 2, 2021. Please visit our site for the most up-to-date information.