Annuity Cash Out: Points To Consider

What is an annuity? Well, it is a contract between an insurance company and a person where the person pays a lump-sum to the company and in return the company provides for periodic payments in the future. There can be various types of annuity but an immediate annuity starts paying immediately as the name suggests. When you want to annuity cash out i.e. liquidate the annuity, it can be done by contacting the insurance company. There is an additional catch of paying surrender fees if you wish to cash out your annuity.

Annuity cash out: Consider all your options before coming to a final decision.

annuity cash outAn annuity cash out can be an expensive affair considering the fact that there can be many charges associated with it like surrender charges, distribution taxes, etc. If you have other options which can be used for getting some money, you may very well decide to leave the annuity alone. Having said that, if the time period that you have had the annuity is long enough and your age is above 59, the taxes imposed can be relatively low. In such a circumstance, cashing out annuity may not be a bad option to consider.

Annuity cash out: the amount of money required

If the money tied up or invested in an immediate annuity is required then a non-periodic distribution is recommended. Before deciding to go for an annuity cash out, it is important to figure out the exact amount of cash required at that juncture. It may very well be possible that a partial withdrawal is enough to suffice your needs and you may not require a complete surrender of the annuity. The charges associated with a complete surrender of annuity is more than that of a partial surrender.

Annuity cash out: contacting the insurance company

After a decision has been made regarding the annuity cash out, the first thing to do is to contact the insurance company holding the annuity. The insurance company will give a brief about the risks associated with cashing out and the charges and taxes that may be incurred by you. It is advisable to have an honest and open-ended discussion with the insurance agent. Complete awareness of your situation will help the insurance company serve you better. It is also possible that they might be able to provide you with a solution for your financial crisis.

Annuity cash out: filling of the required paperwork

After informing your insurance company about your decision of going for an annuity cash out and the insurance company’s failed attempt to make you hold on to the annuity, you will need to fill up certain forms provided by the insurance company. These forms will be related to the surrender or non-periodic distribution of your annuity. Make sure that you read all the documents thoroughly before putting your signatures. Also, ensure that you have bought your identification documents along with you while arriving at the insurance office to get an annuity cash out.

Annuity cash out: Receiving the payment for your annuity

annuity cash outOnce each and every formality regarding the surrender or non-periodic distribution of your annuity is complete, it is time to receive your money. Most insurance companies will transfer the money in your annuity after subtracting charges that may have imposed for the surrender. After receiving the money, do not spend all of the money at once as the money will be taxed. The taxation rules for the money will be governed by various Internal Revenue Services (IRS) and the regulations imposed by the state of your residence.