Most consumers and many advisers don’t know that there is a secondary market in annuities. You sometimes buy a used car; well you can also buy a used annuity known as a Structured Settlement Annuity.
A secondary market annuity is one that was purchased in the past and is currently paying out its benefits to another individual. These income streams are paid by insurance companies and are guaranteed by the issuing carrier, just as if you had purchased it new.
An annuity in payout form is simply a future income stream and can be valued using current interest rates. Annuity coaches simply uses it computer modeling capability to discount future cash flows, just like the insurance company does when it creates an annuity. The present value of the discounted future payments is the value of the annuity.
These cash flow streams are sold on a secondary market. A specific cash flow is offered for sale and then individuals bid for the payment stream. Consumers can often get a better interest rate buying a previously issued annuity, than they can from a new purchase.
A structured settlement is a special type of annuity that is purchased to pay a legal liability at the conclusion of a court case. Most structured settlements are period certain. If a structured settlement is purchased on the secondary market, it will probably involve a judicial decision to transfer the payments to the new owner. This sounds a lot more complicated than it is, because all of these details are handled in the background and included in the bid price.
Retirees with cash they want to turn into retirement income, can often find bargains in this secondary market.
Please work with an expert at matching your individual financial and retirement planning needs to the most appropriate annuity.
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