Over the last several years secondary market annuities have become increasingly popular amongst investors looking to diversify in a changing investment market since the crash of 2008. We want to help explain both what Secondary Market Annuities are and why they have become so popular in recent years.
Secondary Market Annuities come from annuities where the owner sells the rights to some or all of their payments. Annuities usually originate from individuals who have won a settlement or from lottery winnings, and a judge has rewarded guaranteed annuity type payments as part or all of a settlement. The original owner agrees to sell the rights to their payments in exchange for a lump sum payment. Factoring is used on these structured settlement payments which then makes them available to secondary market buyers. When you buy a secondary market annuity, you are essentially buying the rights to the contractually guaranteed payments, and the issuing insurance company retains full ownership of the annuity.
The entire process to buy the rights to the payments has to be ordered/approved by a judge to approve this contractual change of annuity benefits. The issuing insurance company has to approve this transaction as well since they are going to own the policy, and are agreeing to pay the benefits to the purchaser of the structured settlement or secondary market annuity.
The purchase of a secondary market annuity can take as little as 14 days up to several months. The purchase time and experience have a lot to do with the experience of the broker you are working with so it is important to use a company that specializes in secondary market annuities.
Additionally it is as important to include your own CPA in this process, they strongly encouraged to be a part of the transaction is finalized ensuring that the tax ramifications are identified properly.
Recently developed uniform transfer standards and increased inventory have caused secondary market annuities to surge in popularity amongst advisors and investors seeking financial products with above-average interest rates to help supplement retirement income. What years ago was a niche market, is quickly gaining traction with the ordinary investors and advisors alike, and it is time for all advisors to join in the action.
Because if the increased popularity and limited inventory solid secondary market annuities can be harder to come by. For investors looking to take advantage it can be crucial to pull the trigger quickly if you see a specific offering that you like as it is likely that it will be gone quickly. As more investors learn about these higher yield strategies, and that most secondary market annuities are a safe investment alternative as they are associated with highly rated companies, it is certain that secondary market annuities will only continue to grow in popularity.
Nathaniel Pulsifer is a leading expert in annuities and secondary market annuities. He runs SecondaryAnnuities.com DCF Exchange and is dedicated to educating investors and advisors alike about the benefits of secondary market annuities. View available inventory.