Ask Mr. Annuity: Secondary Market Annuities Are “The Key to Income Planning”

Steve Lance and Jeff Dorfman, co-hosts of the Ask Mr. Annuity program, explain that it is important for people to be able to translate their savings into income. In 2010, after the crash, Steve produced his first book, “Annuities: The 21st Century Pension Plan.” That book focused on fixed indexed annuities as a way to build wealth safely. These annuities offered a way to turn savings into a pension type of income that a retiree would not outlive.

Five years later, Steve says, the fixed annuity is still a great retirement plan. However, with the low interest rates that have been in effect for several years now, many people have savings in money market accounts and CDs that pay virtually no interest. To help people turn savings into income, Steve wrote a new book, “The Key to Income Planning,” that explains how secondary market annuities can be a great way to earn fairly high interest on savings and do it safely.

Steve explains that a secondary market annuity is simply an annuity that is already in existence. These are annuities that beneficiaries have sold for cash. Some of them might have been immediate annuities people purchased for themselves. Others might represent the proceeds of a personal injury settlement or the winnings from a lottery. Everyone has heard the J.G. Wentworth commercials about getting cash now. Annuities that have been sold to that company, or others like it, are the secondary market annuities Steve is recommending. Some of these annuities feature immediate payments. Others may have payments that begin a few years from now. But what all of these annuities have in common is that they are backed by large, safe insurance companies and they all pay interest well above anything available through a CD or a money market account.

There is a list of available secondary market annuities on the Ask Mr. Annuity website. An important thing for people to understand is that each one of these annuities is a one-of-a-kind investment. They were all created for specific people and for specific purposes. So it is important for interested investors to keep checking the market, because “When they’re gone, they’re gone.” Steve’s new book explains all of this. The book is available on the Ask Mr. Annuity website for download in PDF format. The earlier book is available as well, at no charge. Those who call Ask Mr. Annuity at 866-551-2522 can get an autographed copy of the book free of charge.

To illustrate how these annuities work, Steve gives a couple of examples. The first one is an annuity written by The Hartford insurance company. The annuity pays a 5% rate of interest, and the annuity runs for a twelve-year period. This particular annuity has a purchase price of $177,000. The payout comes in three lump-sum checks; the first in two years, the second in seven years, the last one in twelve years. The total payback amount comes to $270,000, a total gain of $93,000 on the investment. Another annuity from The Hartford that pays 5% interest. For a purchase price of $227,000, an investor would get back $346,000, a gain of $119,000.

Steve Lance has been a teacher, a financial analyst for GE Capital, and is the author of "Annuities: The 21st Century Pension Plan." Steve Lance along with his co-host Jeff Dorfman ask and answer questions each week that are the concerns of today’s savers retirees on Ask Mr Annuity. The Financial Network is a featured network of Sequence Media Group.