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"Increased yield is created through owners selling their payments at a discount, not the insurance company paying the higher specified rates."
For conservative investors secondary annuities cannot be beaten. The money inside these products are invested by large-well rated insurance carriers, you will find that these monies are often found in government securities and high grade corporate bonds with strong interest rates. That stability means above-average returns when compared to the fixed income portion of your portfolio.
People are awarded annuities as a result of a lawsuit (such as a personal injury award) or winning a lottery. Sometimes these people do not/ cannot, wait for years for their entire payouts. They elect to sell their future payments to someone else in exchange for a lump sum payment . The "resale" of these annuities are called Secondary Market Annuities or Pre-Owned Annuities
Investors can purchase a secondary market annuity from the original owner at a discount, and have the stream of income or lump sum payments assigned to you. These plans will offer a rate of return well above standard fixed annuities, immediate annuities, CDs, or bonds of a similar credit quality. The increased yield is created through the owner selling these payments at a discount, not the insurance company paying the higher specified rates. The insurance company is obligated to make these payments regardless if it is to the original owner or the new investor. When these income streams were originally issued they were issued at current market rates. Many investors often wonder how the insurance company can afford to pay such high rates of return. This yield enhancement is created through the mechanics of the factoring process and the existing owners willingness to sell their payment stream at a discount
Pre-Owned Annuities are structured to give you a reliable, steady income stream for years to come - well into your retirement years. Pre-Owned Annuities can be the key to successfully securing your future. Pre-Owned Annuities are backed by some of the strongest insurance carriers and/or state institutions in America. This means your risk::return ratio is as favorable as it can possibly be. In other words, the Pre-Owned Annuity you choose will guarantee a high rate of return regardless of changes in economy. Thats stability!
Since these annuities are pre-owned, certain attributes are already fixed and cannot be changed.
A pre-owned annuity is a contract, issued by an insurance carrier, as part of a structured settlement. This contract guarantees the holder (the person who purchases a pre-owned annuity) a payment stream over a fixed term at a fixed rate of interest, typically without regard to life contingency (in other words, a certain period only).
For each Annuity, the interest rate will be determined by several factors. Factors include current market conditions, Pre-Owned Annuity term, carrier rating, and buyer acceptance. All interest rates are expressed as an effective rate compounded monthly.
Pre-Owned Annuities, as the name implies, have already gone through one previous owner. As such, certain attributes – such as payment term, payment amounts, and average life – are set and cannot be changed. In return for this diminished flexibility, a Pre-Owned Annuity comes with higher returns.
While there are frequently outliers, the present value of a Pre-Owned Annuity is typically in a range from $50,000 to $150,000 and terms range from five to twenty years.
Pre-Owned Annuities are great investment vehicles for conservative mindsets. Since the money inside your Pre-Owned Annuity is invested by large, well-rated insurance carriers, you will find that those monies are often found in government securities and high-grade corporate bonds with strong guaranteed interest rates. Your Pre-Owned Annuity will also provide above-average returns when compared to the fixed income portion of your portfolio.
No financial product is risk-free. The security of the underlying annuity will always be tied to the health of an issuing insurance carrier and therefore inseparable from that carriers ability to pay claims. A Pre-Owned Annuity will never be a deposit covered by the FDIC. A Pre-Owned Annuity must be held to term and should not be considered a liquid investment. Currency risk applies to foreign buyers, as every Pre-Owned Annuity is offered in U.S. dollars only. Lastly, all traditional risks apply with regards to hedging against current market interest rates.
Pre-Owned Annuities offer you guaranteed future payments from some of the same highly rated insurance companies but with a significantly higher rate of return than with a new direct purchase! All of these policies are in-force. They are being transferred by the annuitant pursuant to state structured settlement transfer laws. Please note that with all Pre-Owned Annuities offered by a State Lottery there is a mandatory 25% federal income tax withholding. Some states also impose an additional 5% withholding.
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To learn more about secondary annuities, read about immediate annuities.
