When Should You Not Cash Out
Your Annuity |
By Jason Rigler |
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You should not cash out your annuity when it's not in your best
interest. Here are 3 reasons it might not be in your best
interest; it's too soon, you don't have a good enough reason, it
will cost you too much. Every day someone cashes out their
annuity or settlement when it might not have been in their best
interest. It's an easy mistake to make when the call of money
and burden of financial stress is weighing heavily on you. But
read carefully and maybe you can avoid digging the hole deeper.
If you are a minor, or the parent of a minor trying to cash out
an annuity, it's too soon. Courts will rarely approve an advance
of a minors settlement except in cases of extreme need. A
guardian will need to be appointed to make sure the transaction
is in the best interests of the minor and not the parent.
Another way it can be too soon, your payments are too far away.
$100,000 due in 2025 is not going to get you $100,000 today. In
fact, you won't even get $25,000. The payout date is too far
away.
Unless you have a good enough reason. If you feel
secure that your $25,000 dollars will yield over the next 20
years a return equivalent to the $100,000 you would have
received, than maybe it's not such a bad idea. Plenty of courts
around the country will be very interested in your reason for
acceleration your settlement or annuity payments. Judges do
their best to evaluate for you whether the transaction is your
best option. Turning in your monthly payments to buy a new car
may not be the best idea. Buying a home, attending school,
averting financial disaster, keeping a home, important medical
needs, all are great reasons to cash in future payments.
Anything else deserves a second look and more serious
consideration.
What also deserves serious consideration
is the bottom line. If you have to give up 50% or more of your
annuity's value is it worth it? That is a very expensive
purchase you are making when you give up $100,000 to get
$25,000. And if your $25,000 buys you a car that depreciates and
breaks down in 5 years, you have so little to show for your
money. I think investing in start up businesses, vacations,
recreational vehicles, and entertainment items are often
questionable reasons to cash in structured settlement payments.
The courts, the settlement cash out companies, your family and
friends will all have their opinions as to whether you should
get an advance on your future payments. But the risk and
responsibility to make the best possible choice rests on your
shoulders. Ask yourself if what you are getting is worth what
you are giving up. There are great reasons to get your money
sooner rather than later, but there are also times when cashing
out is not in your best interest. |
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