Ask Mr. Annuity: Secondary Market Annuities Offer Security and Great Interest Rates

Secondary market annuities—SMAs—are annuities already in force that are available for purchase. Jeff Dorfman and Steve Lance explain how SMAs work and the investment advantages they provide in this Ask Mr. Annuity program.

A secondary market annuity is a plan of guaranteed payments that is insulated from the stock market fluctuations that have made so much news in the past couple of weeks. The benefit payments might commence immediately or start sometime in the future. What distinguishes an SMA from other annuities is that it is already in existence. The annuity might have been the payout to a lottery winner who suddenly wants cash rather than an income stream. It might have come from a personal injury case where the damages were paid in the form of a structured settlement annuity.

An SMA arises when someone sells some or all of the payments from an annuity to company like J.G. Wentworth, whose ads most of us have seen. J.G. Wentworth may buy an annuity and then sell it, retitling the proceeds in the name of the new buyer, to create a secondary market annuity. Ask Mr. Annuity also buys annuities for resale.

Steve says there are a lot of good examples of how an SMA can be a good investment. He cites an annuity from Genworth Life Insurance for $56,000 and receive an effective, guaranteed 6% rate of return. That is a much better rate than is typically found in the market. That particular annuity pays out over a twenty-year period. And, as Steve points out, there is no age restriction on buying an SMA.

The Genworth annuity would start immediately. However, Steve says, there are a number of SMAs that don’t start immediately. For someone who is 45 or 50 and wants the payments to start in 20 years, there are SMAs that would fill that need. Steve mentions that there is a list of these SMAs on the Ask Mr. Annuity website.

Steve also discusses an annuity that is involved with a structured settlement. The sale from the original annuity beneficiary has to be approved by the court as being in the best interest of the beneficiary. The court’s approval gives some added protection to the SMA buyer. Steve discusses one SMA that whose payments won’t start for 20 years. For a purchase price of $128,000, the SMA carries a return rate of almost 7%. The total return would be $701,286!

Jeff points out that Ask Mr. Annuity will buy an annuity and provide immediate cash or will sell a secondary market annuity to provide a secure income stream.

Steve and Jeff can be reached at (866) 551-2522.

 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.