How to Cash Out Your Annuity Settlement [2021 Guide]
Cashing out your annuity settlement isn’t always recommended, but if you’re in an emergency and need cash, it’s a good option to have. Most reasons for cashing out annuity settlements involve medical emergencies, job loss, or major lifestyle changes.
To help you understand the process and balance the risk and reward, this is everything you need to know when it comes to cashing out your annuity settlement.
What Is a Structured Settlement
A structured settlement is what you gain when you win a personal injury suit. When you win this suit, you typically have two options. You can either take the one-time lump sum of cash, or you can accept it in a series of payments over time.
If you choose the latter option, you’re accepting a structured settlement annuity. A structured settlement offers tax incentives and ensures a stream of income over time. It also protects individuals from the responsibility of managing a large sum of money at one time.
Reasons for Cashing Out Your Annuity Settlement
There are several reasons someone may need to cash out on their annuity settlement. This includes unexpected job loss, medical emergencies, and financial emergencies.
Keep in mind that early withdrawals of annuity settlements come with expensive tax implications. The tax penalties are the highest when you try to take cash out soon after you’ve received your settlement. The more years that have passed since receiving your settlement, the lower the penalties.
How to Cash Out Your Annuity Settlement
The process of taking cash out involves several steps. You should first research annuity purchasers.
Researching potential buyers is important because fraud and unethical practices can occur if you’re not careful. A trusted annuity buyer should provide you with a free quote and full transparency.
You can also find companies, like Rightway Funding, that can walk you through the process.
Once you’ve selected your buyer, you should obtain a quote. The quote provides you with your discount rate, which averages about 12%. The discount rate varies based on the size and frequency of your payments.
Once you’ve received your quote and understand what it means, you’re ready to submit your paperwork. Legally, you must submit paperwork so buyers can access the annuity contract. Be prepared to provide identification and tax information in the paperwork.
The last step in the annuity settlement process is presenting your case to a judge. You will need to attend a hearing and receive the judge’s approval before your money transfer can occur.
Though this step can take time, it protects you and ensures the appropriate steps and procedures are being followed.
Now You Know the Process of Cashing Out Your Annuity Settlement
Though it’s not ideal to cash out your annuity settlement, there are several circumstances where it may be necessary. By understanding how the process works and weighing all your financial options, you’ll be more likely to make a responsible decision.
It also helps to have a lawyer who can provide you with trusted legal advice along the way. They can also answer questions specifically related to your financial situation.
So, if you’re planning to pull out cash, talk to a lawyer today!
And if you want to learn about more financial topics like this, be sure to check out the rest of our blog. We have a ton of other helpful information that you’ll love!