Pros and Cons of Selling an Annuity

Pros and Cons of Selling an Annuity

Daniel has a big decision to make; he needs to decide whether or not he should sell his annuity. He has gathered his most trusted friends and family to help him evaluate the pros and cons of selling an annuity.

Recently, Daniel was diagnosed with a serious illness; it’s treatable, but the treatment program is very expensive and well beyond his current means. He approached his family about helping him with expenses, but they were unable to come up with the cash he needed. As a last resort, he is considering selling his annuity payments for cash to help him make it through this financially trying time. To help make the decision, he has gathered his mother Mary, father Bruce, best friend Michael, and his wife Sharon to discuss the situation.

Daniel: Thank you all for helping me with this huge decision. As you know, if I don’t sell my annuity payments, I won’t be able to afford my medical treatment and Sharon and I will no doubt lose our home. However, I know there are downsides, which is why I need all of you to help me assess the pros and cons of selling an annuity and decide what the best decision is for me moving forward.

Sharon: There’s no way you’re not taking that treatment, but my worry is what happens afterward. We depend on those payments to help make ends meet; if you sell your annuity, what happens to our financial situation in the long-term?

Pros and Cons of Selling AnnuityMichael: What about investing some of the proceeds of the sale? By selling your annuity, you get an immediate lump sum of cash as opposed to small payments dispersed over a long period of time. After covering your medical costs, you could use the excess to invest or start a business – either of which could pay dividends well above the small payments you’re currently receiving.

Mary: While I agree with what Michael is saying, my concern is that you may be selling yourself short. One of the cons of selling your annuity is that you will sell at a discount, as the annuity buyer will need to make money somehow. If you keep your annuity payments, you’ll end up with more money in the long-term.

Bruce: If he could safely make it to the long-term, that would be worth considering, but if he doesn’t get that money immediately, he and Sharon will have to go into debt, they may lose the house, and potentially be worse off in the long-term over what works out to be a negligible amount of money. I think he should sell, and like Michael suggested, invest the access in some other venture that can amplify the power of his money.

Daniel: Actually, I spoke to a very helpful customer service representative at and she offered another option to selling my entire annuity – I could only sell part. That way, I can get the money I need to pay for my treatment and still continue to receive annuity payments, albeit smaller.

Sharon: That’s not a bad idea, plus it helps appease one of my other fears: that you sell the annuity and we end up squandering the money. Having access to such a large amount of money all at once can sometimes lead to erratic and emotionally-driven spending that could leave us worse off in the long run. By only taking what we need, that could act as a fail-safe to ensure the money isn’t wasted.

Michael: True, but you’d still be short in the long run. While you would still receive annuity payments, they would be smaller than the ones you get now, and even with those you’re still struggling to make ends meet. Adjusting your budget would require a substantial change in lifestyle and you may end up losing your home anyway.

Bruce: That’s a valid point. Investing the difference or starting a business could be the best way to ensure both your short-term and long-term interests are taken care of. My vote is to take Michael’s suggestion.

Mary: I don’t know, I’m not convinced. There’s always a chance the investments or the business might turn sour. I think the best course of action is the partial sale.

Daniel: Thank you all very much, your advice and opinions mean a great deal to me. I appreciate you taking the time to help me weigh-in on the pros and cons of selling an annuity and you’ve brought a lot of issues I hadn’t even considered to the forefront. Sharon and I have a big decision to make.

If you were Daniel, what would you do? Do you think the pros of selling his annuity exceed the cons? Is a partial sale a good option or should he opt to sell his entire annuity and take advantage of the power of a lump sum?

If you’re considering the pros and cons of selling an annuity, get the sound advice you need to make the best decision for you by calling (800) 543-6513 or requesting a quote!