The Pros and Cons of Getting Cash for an Annuity Payment
For anyone currently receiving annuity payments, cashing in those payments for a lump sum of money may be a consideration. While there are many advantages to getting cash for annuity payments, there are also some potential drawbacks for doing so.
Pro: Get money when you really need it
One of most advantageous reasons for getting cash for an annuity payment is to have access to money when you need it. Receiving minute payments over a long period of time may not matter much if you need a lump sum today. Therefore, you can cash in the annuity and use your money at your discretion instead of waiting for all of those checks in the future.
Con: Depleting an asset
However, a problem some people run into when they cash in an annuity is needing a lump sum of money in the future and not having anything to fall back on. If you cash in the entire annuity and spend the lump sum of money, you will not have it for future emergencies. Therefore, you should take this into consideration when deciding what you are spending your money on and your future needs.
Pro: Control your investment
Some people sell an annuity even though they are not in need of a lump sum of money right away. One of the beneficial aspects of selling an annuity is the ability to invest it in a more profitable manner. If you are earning interest on your annuity, it is probably a fairly low rate, possibly not even enough to keep up with inflation. For this reason, investing your lump sum cash in a higher earning investment vehicle often makes perfect sense and more readily provides for your future.
Con: Utilizing a disreputable company
Another potential downfall some people make when getting cash for an annuity payment is utilizing a disreputable company and not being treated fairly in the selling of their annuity. While this does not happen often, it does sometimes happen. You should be careful in choosing which company to do business with because all of them are not created equally. In the last few years, many companies have popped up offering to buy annuities and structured settlements. While most are trustworthy, some are not. Be sure to do your homework and use a company that you can feel safe with. If necessary, contact the Better Business Bureau in your area to check the credibility of the company you are considering.