You can sell an annuity, but the process depends on what type you own and whether you're still in the surrender period

Selling an annuity is possible, but it's not the same as selling a stock or bond. Most annuities can be sold to a third party through what's called a secondary market transaction, where a factoring company buys your future payments in exchange for a lump sum of cash today. However, if you're still within your annuity's surrender period — typically 5 to 10 years from purchase — your insurance company will charge you a surrender fee that can be substantial, sometimes 5 to 10 percent of your account value. Even after the surrender period ends, selling your annuity means giving up all future payments, so you need to understand what you're trading away.

The secondary market for annuities exists because some people need cash now more than they need income later, and some investors are willing to buy those future payments at a discount. The process is legal, regulated by state insurance departments, and happens thousands of times each year. But it's permanent — once you sell, you cannot get those payments back.

Key Takeaways

  • You can sell an annuity through a secondary market company, but you'll receive less than the full value of your remaining payments because the buyer takes a discount for the risk and time value of money.
  • If you're still in the surrender period, your insurance company will charge a surrender fee before any sale can happen, reducing the cash you receive.
  • Selling an annuity is permanent — once you accept payment, you lose all future income from that contract, so consider whether you truly need the money now.
  • The secondary market process typically takes 30 to 90 days from initial contact to receiving your funds, and you'll need court approval if you're selling structured settlement payments.
  • Not all annuities can be sold; when ready annuities and some pension payout options have restrictions or cannot be sold at all.

When you can and cannot sell an annuity

Not every annuity is sellable. Deferred annuities — the kind where you make payments over time and receive income later — are usually the easiest to sell on the secondary market. when ready annuities, where you pay a lump sum and begin receiving payments right away, are much harder to sell and some companies won't buy them at all. If your annuity is a may have access to annuity (one funded with pre-tax retirement money like an IRA or 401(k)), the sale may trigger tax consequences you need to understand before proceeding.

If your annuity is part of a structured settlement — money from a legal judgment or insurance claim — you can still sell it, but the process requires court approval. A judge must find that the sale is in your best interest, which adds time and legal steps. Some annuities also have restrictions written into the contract itself; read your contract or call your insurance company to confirm whether a sale is even permitted. Pension payout options and certain protected annuities may be non-transferable by law.

How the secondary market sale works

When you decide to sell, you contact a secondary market company (also called a factoring company or purchasing company). These are private businesses that buy annuity payments from people who need cash now. The company will ask you for details about your annuity: the insurance company that issued it, your remaining payment schedule, the amount of each payment, and when they're due to end. You can find these companies through an online search or by asking your insurance company for a list of buyers they work with.

The company then makes you an offer — a lump sum that's less than the total of all your remaining payments. The discount reflects the buyer's cost of money, the risk they're taking, and their profit margin. For example, if you have $100,000 in remaining payments, you might receive an offer of $60,000 to $75,000, depending on how many years of payments remain and current interest rates. You're not required to accept the first offer; you can shop around and compare offers from multiple companies before deciding.

Once you accept an offer, the company handles the paperwork with your insurance company to transfer the payment rights. This process typically takes 30 to 90 days. If your annuity is a structured settlement, you'll also need to file a petition in the court that approved the original settlement, and a judge must sign off on the sale. The court process can add another 30 to 60 days to the timeline.

Surrender fees and what they cost you

If you're still within your annuity's surrender period, your insurance company will deduct a surrender fee before the secondary market company pays you. This fee is charged by the insurance company, not by the buyer, and it comes out of the sale proceeds. Surrender fees are typically a percentage of your account value — often starting at 7 to 10 percent in year one and declining by 1 percent each year until the period ends. Some contracts have flat fees instead of declining schedules, so check your paperwork to see what applies to you.

For example, if your annuity has a $100,000 account value and you're in year three of a seven-year surrender period with a declining fee schedule, the surrender charge might be 5 percent, or $5,000. That $5,000 is paid to the insurance company, and the secondary market company's offer is based on what's left after that fee is subtracted. This is why selling early can be expensive — you're paying both the surrender fee and accepting a discount on the remaining payments. If you're near the end of your surrender period, it may be worth waiting a few months to avoid the fee entirely.

Tax consequences of selling your annuity

The tax impact of selling an annuity depends on whether it's may have access to or non-may have access to and how much gain you have. With a non-may have access to annuity (one funded with after-tax money), you typically owe income tax on the gain — the difference between what you paid into the annuity and what it's worth now. If you sell for a lump sum, that entire gain is taxable in the year of the sale, which could push you into a higher tax bracket and affect other tax situations like Medicare premiums or state taxes.

With a may have access to annuity (funded with pre-tax retirement dollars), the entire lump sum payment is taxable as ordinary income. If you're under age 59½, you may also owe a 10 percent early withdrawal penalty on top of income tax, unless an exception applies. Before you sell, talk to a tax professional about how much you'll owe and whether the net proceeds (after taxes and fees) are still worth it to you. The tax bill can be substantial and may surprise you if you're not prepared.

Comparing your options before you sell

Selling an annuity is permanent. Once the secondary market company owns your payments, you cannot get them back. Before you commit, consider whether there are other ways to get the cash you need. Some annuities allow partial withdrawals or loans against the account value, which may cost less than selling the whole thing. Others have a free withdrawal period each year where you can take out a percentage without penalty. Check your contract or call your insurance company to see what options are built into your specific annuity.

If you need money for a genuine emergency — medical bills, home repair, or debt crisis — selling may make sense. If you're considering it because you want to invest the money elsewhere or because you're unhappy with the annuity's returns, pause and think carefully. You're trading may provide future income for a one-time payment that's discounted. Once it's gone, it's gone, and you lose the income security the annuity was supposed to provide. A financial advisor can help you weigh whether the trade-off is right for your situation.

What to expect from secondary market companies

Legitimate secondary market companies are regulated by state insurance departments and must follow strict rules about how they present offers and handle your information. They should provide a written offer that clearly states the lump sum amount, the fees they're charging, and the timeline for payment. They should also explain that you have the right to walk away and that you should consider consulting a financial advisor or attorney before signing. Reputable companies will give you time to review the offer and ask questions.

Be cautious of companies that pressure you to decide quickly, promise unusually high payouts, or ask for upfront fees before providing an offer. Reputable companies don't charge you to make an offer — they make their money from the discount they take on the payments. If something feels off, get a second opinion from another company or from a financial advisor before proceeding. You can also contact your state's insurance department if you have questions about whether a company is legitimate.

Frequently Asked Questions

How much less will I get if I sell my annuity?

The discount varies based on how many years of payments remain, current interest rates, and the buyer's assessment of risk. Generally, the more years of payments left, the bigger the discount. You might receive 60 to 80 percent of the total remaining payment value, but this varies widely. Always get multiple offers to compare.

Can I sell just part of my annuity payments?

Yes, many secondary market companies will buy only a portion of your remaining payments — for example, the next five years instead of all twenty. This lets you get some cash now while keeping some future income. The offer will be based only on the payments you're selling.

What happens if I change my mind after I accept an offer?

Most secondary market companies give you a short window — typically 3 to 15 days — to cancel the transaction after you sign. Once that period ends and the paperwork is submitted to your insurance company, the sale is usually final. Check the contract for the exact cancellation period before you sign.

Will selling my annuity affect my Social Security or government benefits?

If you receive means-tested benefits like Supplemental Security Income or Medicaid, a lump sum from selling your annuity could affect your may be able to access because it counts as income or assets. Talk to your benefits administrator before you sell to understand the impact.

Do I need a lawyer to sell my annuity?

You don't need a lawyer for a regular deferred annuity sale, but it's wise to have one review the contract if you're selling a structured settlement, since court approval is required. A lawyer can also help you understand the tax and benefit implications before you commit.