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Some types of immediate annuities can be sold by their owners to interested buyers or investors. Annuities are usually sold in the secondary market where owned security properties can be sold or traded. For the purposes of this book, the immediate annuity is divided into two types – the qualified and non-qualified annuity. This division is based on the type of funds or assets that are used to purchase the annuity contract.


Qualified Immediate Annuities

Qualified immediate annuities are annuities considered as a retirement account that goes through certain requirements under taxation laws. This kind of immediate annuities, which are also called retirement annuities, are not allowed by the Internal Revenue Service to be sold by annuity owners. These annuities are classified as Roth individual retirement annuities and are non-transferable. They are purchased from pre-tax assets, which means that the value used to purchase the annuity was not yet subjected to taxation. Therefore, the regular income received in qualified annuities is taxable.

Annuity rates in qualified contracts generally apply to both the female and the male sex. However, some states require different rates for females and males.

Non-Qualified Immediate Annuities

Non-qualified immediate annuities are purchased with after-tax assets. This means that the money used to purchase the annuity had already been subjected to taxation. Therefore, a part of the income from non-qualified annuities is measured, using a particular exclusion ratio, as a return from the annuity principal (which had already been taxed). This part of the annuity income is exempted from tax. Examples of after-tax assets are earnings from the sale of a private property (like your house), Certificate of Deposit, proceeds from a previous life insurance policy, and mutual funds.

Non-qualified annuities are not considered as retirement accounts and are transferrable. Because they are transferrable, some states allow annuity owners to sell their accounts or contracts. When an annuity owner sells his/her annuity, he/she will receive a lump sum payment from the buyer of his/her contract. After the sale, the person who bought the annuity contract will be the one to receive the remaining income (usually every month) from the annuity.

Annuity rates in non-qualified contracts are generally different for females and for males. There are some states, however, where unisex annuity rates are required.

Reasons Why Annuitants Sell Their Annuities

Most annuitants who sell their annuity contracts want to get a lump sum payment instead of receiving a monthly income. Generally, they are young annuitants who do not have to save for long term goals – like retirement goals. On the other hand, older annuitants (most of them retirees) generally do not sell their annuities because they want a stable source of income that can last as long as they live.

You might want to sell your annuity contract because you badly need a huge amount of money as soon as possible. You might need to pay off a debt or to purchase a house. In this case, you might opt to sell your annuity so that you can collect the amount of money you need at the moment.

Look Before You Leap

Depending on your current situation, selling an annuity can be advantageous.  It does not mean, however, that you should do something just because you are allowed to. Make sure that you will make an informed decision. Ask help not only from your family and friends but also from annuity experts.

In selling your annuity, you have to keep in mind that you will not be able to get the full value of your annuity account. Generally, investors will only be interested if they will profit from the transaction.