Annuities are financial products into which regular deposits are made toward an eventual payment period. When such disbursement is allowed depends on the annuity type and special circumstances. If such distribution is not allowed, then an annuity liquidation program is a means through which people can have access to their investment into their annuities.
1. Liquidity programs provide up-front cash.
Annuities have a period in which disbursement is allowed. Some annuities, such as life annuities, can even have periods in which withdrawals become mandatory, such as by the IRS. If the disbursement period is not yet upon you, a liquidity is one means through which you can access those funds anyway. That money is provided to you as soon as you agree to the program, and it may be a single lump sump or even multiple payments made over time depending on the program.
2. Future annuity payments are purchased.
Such programs are able to pay you up front because they are purchasing the payments that your annuity will eventually provide. This generally means that the money you receive will be less than what the payment or payments will be during the disbursement period. Nevertheless, if you are in a scenario where you have to pay surrender charges, for instance, the program can be the more cost-effective option.
3. Both partial and total streams are an option.
You can use a program to liquidate a partial stream, which could be one payment or a series of payments. Partial liquidity can even occur at various parts of the disbursement period. In other words, it doesn’t have to start at the beginning, finish at the end or even be continuous depending on the terms of the program. A total or full stream means that you are cashing out the entire annuity.
4. There are no surrender charges.
Surrender charges are paid when you withdraw from an annuity early and are paid to the company that owns the financial product. There are no surrender charges since this is a partial or full transfer of ownership, and the annuity pays out as it was originally intended.
5. Liquidity programs can be used to cash out inherited annuities.
One of the most common reasons liquidity programs are used is for inherited annuities. Beneficiaries inherit the remaining payments and then sell them so that they can use the money now. This is common among younger people who are not yet in the retirement phase.
Although there are certain facts that are consistent to all annuity liquidity programs, not all programs are the same. The ideal program depends on the particular annuity, why the money is needed and other factors. It is often best to seek advice from a financial advisor on such matters.