Can I Withdraw Money from My Secondary Market Annuity?
Without question, the number one benefit of a secondary market annuity is its ability to provide a yield greater than what is currently offered by insurance carriers. The tradeoff is that you give up control over the premium paid to acquire the SMA.
So while receiving a higher-yielding income stream or lump sum is a great comfort to have, the fact that a secondary market annuity is mostly illiquid can feel quite restrictive to someone shopping for this type of product.
If you're wondering, “Can I tap into my SMA if something unexpected happens and I need extra cash?” -- The answer is – usually not. Many SMAs offer zero liquidity and no ability to re-sell your income stream. You must simply accept the payment stream under the terms of the original contract.
However, there are some SMAs that will allow you to re-sell your income stream. Keep in mind that you will only receive whatever the market will bear at that time, and this could be a discounted lump sum. Be sure to consult your advisor to see whether or not your SMA can be re-sold.
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If you prefer a product that offers more liquidity, there are a variety of options for you. For starters, many immediate annuities now have liquidity features built-in which will allow you to withdraw lump sums of money if necessary.
For even greater liquidity, you might consider a deferrred annuity or a fixed index annuity. While these annuity types generally charge surrender fees for early withdrawals, you will still be able to access most of your principal, even in the early years of your annuity.