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What Are Secondary Market Annuities?

This is the quick summary of Secondary Market Annuities

 

In today’s yield starved world, investors have precious few options for when it comes to quality investments that offer a decent yield.  That’s why Secondary Market Annuities are so compelling.

In this brief video, I’ll give you a full introduction to Secondary Market Annuities so you can understand completely, before making a purchase decision.

 

Generating Returns With Secondary Market Annuities – Video 6

In a recent appearance with nationally syndicated online columnist Steve Savant, AST’s Bryan Anderson talked about why Secondary Market Annuities yields are so good.  What a refreshing alternative to CD’s and other options!

 

With interest rates low, consumers are seeking safe returns that beat certificate of deposits and traditional annuity rates. Some are finding increased returns in the secondary annuity market. This alternative insurance product could be an additional supplement to retirement income. Annuity Market expert Bryan Anderson is interviewed by Steve Savant, syndicated financial columnist and talk show host of Steve Savant’s Money, the Name of the Game.

 

Other videos in the series:

Video 1- Steve Savant and Bryan Anderson On Secondary Market Annuities

Video 2- Why Secondary Market Annuities Are A Great Income Alternative

Video 3- Using Deferred Income Secondary Market Annuities

Video 4- Lump Sums and Secondary Market Annuities

Video 5- Using Secondary Market Annuities In Planning Scenarios

Video 6- Steve Savant’s ‘The Name Of The Game” On Secondary Market Annuities

 

Using Secondary Market Annuities in Client Planning Scenarios- Video 5

In this final installment of the Steve Savant show “Lets Get Down To Business” our own Bryan Anderson discusses how we use Secondary Market Annuities in various planning scenarios.

Enjoy!

 

Secondary market annuities are generally issued by highly rated life insurance companies. Factoring companies make a market for structured settlements with wholesale brokers and purchase these annuities for consumers seeking better returns. Annuity Straight Talk is a leading distributor for secondary market annuities. Product expert Bryan Anderson of AnnuityStraightTalk.com is interviewed by Steve Savant, syndicated financial columnist and talk show host featuring Secondary Market Annuities on Let’s Get Down to Business.

 

Other videos in the series:

Video 1- Steve Savant and Bryan Anderson On Secondary Market Annuities

Video 2- Why Secondary Market Annuities Are A Great Income Alternative

Video 3- Using Deferred Income Secondary Market Annuities

Video 4- Lump Sums and Secondary Market Annuities

Video 5- Using Secondary Market Annuities In Planning Scenarios

Video 6- Steve Savant’s ‘The Name Of The Game” On Secondary Market Annuities

 

Lump Sums and Secondary Market Annuities- Video 4

In this fourth installment, Bryan Anderson and Steve Savant discuss mortality credits and the higher yield that Secondary Market Annuities offer to investors.  Feel free to give us a call if this video generates any questions,

 

Mortality credits applied to annuities can increase returns beyond a carrier’s portfolio yield. These credits are based on the annuitant’s age and the length of the policy. The practical application of structured settlements is based on matching an investor’s need to the available inventory of structured settlements. Product expert Bryan Anderson of AnnuityStraightTalk.com is interviewed by Steve Savant, syndicated financial columnist and talk show host featuring Secondary Market Annuities on Let’s Get Down to Business.

 

Other videos in the series:

Video 1- Steve Savant and Bryan Anderson On Secondary Market Annuities

Video 2- Why Secondary Market Annuities Are A Great Income Alternative

Video 3- Using Deferred Income Secondary Market Annuities

Video 4- Lump sums and Secondary Market Annuities

Video 5- Using Secondary Market Annuities In Planning Scenarios

Video 6- Steve Savant’s ‘The Name Of The Game” On Secondary Market Annuities

 

Why Deferred Secondary Market Annuities Are The Most Efficient Use Of Funds- Video 3

In this third installment of the Steve Savant special week on Secondary Market Annuities, Bryan gets on a roll discussing how deferred income Secondary Market Annuities can offer the most powerful guaranteed income out there.  For customers who don’t need the bells and whistles of other types of annuities with riders and benefits, Secondary Market Annuities are the way to go.

 

Some structured settlements offer payments similar to deferred income annuities, where payments are delayed for a period of time before installments begin. But some structured settlements can defer for a period of time and distribute lump sums instead of a stream of income. Product expert Bryan Anderson of AnnuityStraightTalk.com is interviewed by Steve Savant, syndicated financial columnist and talk show host featuring Secondary Market Annuities on Let’s Get Down to Business.

 

Other videos in the series:

Video 1- Steve Savant and Bryan Anderson On Secondary Market Annuities

Video 2- Why Secondary Market Annuities Are A Great Income Alternative

Video 3- Using Deferred Income Secondary Market Annuities

Video 4- Lump Sums and Secondary Market Annuities

Video 5- Using Secondary Market Annuities In Planning Scenarios

Video 6- Steve Savant’s ‘The Name Of The Game” On Secondary Market Annuities

 

Why Secondary Market Annuities Are A Great Income Alternative- Video 2

Here is video 2 of Annuity Straight Talk’s Bryan Anderson on Steve Savant’s nationally syndicated ‘Lets Get Down To Business” discussing Secondary Market Annuities.

This show is designed for advisors, so there are certain acronyms and industry shorthand is discussed.  If you have any  questions, don’t hesitate to give us a call to discover if Secondary Market Annuities might be right for your situation.

 

Structured settlements have two important characteristics that make them appealing to an investor: above market yields and/or discounted present value lump sum purchase. At the same time there are two possible drawbacks to structured settlements as well: il-liquidity and no lifetime payouts.

Product expert Bryan Anderson of AnnuityStraightTalk.com is interviewed by Steve Savant, syndicated financial columnist and talk show host featuring Secondary Market Annuities on Let’s Get Down to Business.

Other videos in the series:

Video 1- Steve Savant and Bryan Anderson On Secondary Market Annuities

Video 2- Why Secondary Market Annuities Are A Great Income Alternative

Video 3- Using Deferred Income Secondary Market Annuities

Video 4- Lump Sums and Secondary Market Annuities

Video 5- Using Secondary Market Annuities In Planning Scenarios

Video 6- Steve Savant’s ‘The Name Of The Game” On Secondary Market Annuities

 

Secondary Market Annuities- AST on the Steve Savant show with Secondary Market Annuities

We hope you enjoy this first of several videos from the nationally syndicated online financial  commentator, Steve Savant, who recently hosted Bryan Anderson of Annuity Straight Talk on his show for a week of episodes featuring Secondary Market Annuities.  The show is geared to advisors and financial professionals but everyone will learn something.

Here’s the first video:

 

Product expert Bryan Anderson of AnnuityStraightTalk.com is interviewed by Steve Savant, syndicated financial columnist and talk show host featuring Secondary Market Annuities on Let’s Get Down to Business.

 

Other videos in the series:

Video 1- Steve Savant and Bryan Anderson On Secondary Market Annuities

Video 2- Why Secondary Market Annuities Are A Great Income Alternative

Video 3- Using Deferred Income Secondary Market Annuities

Video 4- Lump Sums and Secondary Market Annuities

Video 5- Using Secondary Market Annuities In Planning Scenarios

Video 6- Steve Savant’s ‘The Name Of The Game” On Secondary Market Annuities

 

Case Study- Quick Close Secondary Market Annuities

We had a lovely experience over the weekend.  A client called Friday afternoon, late, wanting an in-stock SMA for his mother.  He’d been watching our list for a few weeks and made the mistake of reserving several cases from another vendor.

After 3 of his 6 cases from ‘the other guy’ fell apart, he called us back and reserved a 2 year short lump sum as a perfect CD replacement for her matured CD.

He was able to review the closing book over the weekend, and arranged her wire on Monday.  The case closed today, and the only delay was due to the slowness of the banks in processing the wire transfer.

If you are ready for the “In Stock” SMA experience, give us a call!

To check out our inventory available now- CLICK HERE

Why SMA’s Are Hard To Beat

While we work with a variety of annuities, we frequently gravitate to Secondary Market Annuities.  For investors specifically seeking a lifetime income stream that can not be outlived, SMA’s are not appropriate.  But for many, a fixed period of time or a fixed lump sum is appropriate, and the yield on the SMA’s makes it very attractive to use these fixed term cases.

For period certain returns, SMAs are beating everything handily with nothing else coming close for the following reasons:

  • The returns are well above any other fixed income asset class of similar safety and credit quality (A to AAA)
  • The income on the SMAs is consistent, known and a blend of principal and interest, facilitating a known and orderly drawdown of assets without risk to principal from price fluctuations
  • By using SMAs you’ll be able to count on this portion of your portfolio to provide steady, consistent cash flows to supplement your monthly living expenses and thus allowing you to leave other investments alone, allowing them to return to the “Average Returns” and eliminate a “Sequence of Returns” risk.  See this excellent summary of the sequence of returns risk, a study by Moshe Milevsky
  • Diversification will be achieved by purchasing several different SMAs that add up to desired investment and will provide the desired income

To put a solid floor of income in place, determine your needs and goals.  Contact us and let us know what you are looking for.  Understand the process so that when we find the right deals for you, you can make an informed decision

It takes some patience but in the end it’s well worth it.

Why Take 1.15% When You Can Get 4.5%?

NYLLogoNew York Life  announced earlier this year it’s short and mid term, guaranteed fixed annuity rate of 1.15%.  Citing a continued flat-line market, NYLife is offering rates little better than a CD as a guaranteed floor rate.

There is a market value adjustment, so the actual yield to maturity may be higher, however the floor may also be all that is earned

When considering fixed annuities or options similar to the NY Life above, take a moment first to call us and discuss Secondary Market Annuities.

Short and mid term lump sums routinely pay 4.5 to 5% effective rate of return.  Deferred…. compounding… and often, from NY Life itself!

To put it in perspective, a $100,000 investment today will pay back $102,311.89 in three years at 1.15%

The EXACT SAME INVESTMENT of $100,000 today will pay $109,197.02 at 4.5%

That’s nearly a 4X increase in real dollars – $2311 in Interest income vs $9197!!

Secondary Market Annuities are pure and simple, more income at a lower cost.  Give us a call to find out more.

 

 

 

Perfect IRA Deal- A Nice Deferred Lump Sum

Today I want to feature a deferred, lump sum investment that is just hard to beat.  We have two similar lump sums, from two different top rated carriers, AIG and Prudential.  Each have the same payment stream.

The AIG deal is this one:

What makes this so special?  Well, compare it to a CD or a fixed annuity.  For an investor with a bucket of cash and time to defer, there are few better ways to position assets today.

Take an IRA for example.  For a 50 year old, an IRA is a bucket of money that you can’t touch until you retire, age 59.5 at the earliest without IRS penalty.  What’s a 50 year old to do? You have to defer for 10 years at minimum…. and if you’re looking to retire at 65, this is a perfectly timed passive and safe investment.

Long term deferred lump sum investments make perfect sense in an IRA where you can’t do anything with the money anyway until you retire.  And concerns about a large amount of taxable income coming in one year are moot when you do this deal in an IRA.  It’s all tax deferred anyway.

Compare CD’s at a paltry 1.5 % rate, taxable annually… Fixed annuities at about 3%…. Muni bonds at 2% to 4% and susceptible to principal degradation if rates rise… and compare to Treasuries at 1%… ish.

These yields are you other ‘safe’ money options.  Why wouldn’t you seriously consider a fantastic  lump sum deferred deal like the one above that has a guaranteed price, and guaranteed payout, fixed and defined terms, and a great rate?

We’re waiting for your call- 2 of these are available today, one from AIG and one from Prudential.  800-438-5121.

Substantial Immediate Income & 5.5% Rate

Today I want to highlight two large immediate income deals.  It’s not often that we have substantial cases, because most settlements are smaller in nature.  However today we have a Genworth and a John Hancock case each nearly $2 million in size.  And each offers a long-term increasing income stream that is just perfect for retirement.

The most attractive case I have seen in years is this John Hancock case.  At a 5.5% effective interest rate, this is truly an outstanding deal.  With fixed annuities paying in the neighborhood of 3%, high quality bonds in the 3 to 4% range, and 20 year period certain immediate annuities in the 2 1/2% effective rate of return range, the 5.5% rate on the John Hancock case is an astounding value.

For an investment of just over $2 million, we can deliver a guaranteed 33 year income stream paying out $5,117,771.09.  Can your financial advisor guarantee you the same output?  I doubt it…

The beauty of secondary market annuities is that we can simply deliver more income, coupled with an outstanding guarantee, for a lower purchase price than other comparable investment options.    No other retirement income plan comes close to this level of return, guarantee, and safety

The downside of the John Hancock case is that it cannot be split among several investors, it cannot be purchased with IRA funds, nor can a trust be the purchasing entity.  But it is perfect for high net worth individual looking for a guaranteed income stream lasting 33 years, and we’re investigating the use of a simple LLC holding company to accommodate a couple of members to purchase the case.  Call for details

The case starts paying $4880 per month in January of next year, and that payment stream increases by 3% per year for five years.  Then in the middle of 2018, the income jumps from $5657 per month to $9478 per month.  That income stream also increases 3% per year, and lasts 27 years.  The final 12 months of payments are at $21,054 per month.

This is a substantial income from one of the top carriers in the business.  With uniform A to A+ ratings and a Comdex score of 93, John Hancock is simply at the top of the game.

As if the John Hancock case wasn’t enough, we also have a Genworth case nearly the same size that pays out over a shorter period of time. The Genworth case starts in just a few months with its income at $10,350 per month.  The income stream increases each year for 18 years, with a final 12 months at $17,620 per month.

Whereas the John Hancock case cannot be split, this Genworth case can be split among several investors, so if you are interested in a portion of this case, please let me know.

These two large immediate income cases show just some of the power of the secondary market for annuities.  If either one suits your fancy please don’t hesitate to call to learn more.

Is Your Home Equity Optimized?

Home equity has been unreliable  recent years.  Too many used home equity as an ATM, and the real estate downturn has left many realizing the folly of their ways with homes worth less than their mortgage.

However while  most of the visitors to this site have significant equity or paid off homes, most are only considering their homes as an asset to be utilized far in the future when they downsize.

I’d like to propose another way of using your home today, and capitalizing on the unbelievably low interest rates in the home mortgage market.

For many people with good credit, home loans can be obtained in the 3% to 4.5% range.  It doesn’t really take a rocket scientist to realize that investing money borrowed at 3.5% into a new investment yielding 5 to 6% is a good deal.

Consider these four current offers (as of 8/2/12): each one offers a solid cash flow, as well as lump sums.  Depending on how much money you borrow from your home, the income stream can be used to pay your mortgage, even pay it off.  This leaves you a lump sum that matures in the future as essentially free money.

Home Equity Secondary Market Annuities

The Genworth case is a perfect example.  It pays $4800/ month for 306 months, then pays $550,000 lump sum.  At 4% interest, you could borrow $1,005,413 on a 30 year home mortgage with payments of $4800/ month.   Theoretically, you could borrow the entire purchase price of $922,969, pay the mortgage off with the income stream, and be left with $550,000 at the end of the term.

Now, jumbo mortgage rates, your risk tolerance, and other factors may make this specific amount of borrowing not advisable.  But let’s say you have $550,000 to invest, and a paid off home worth $1M.  You could easily borrow $400,000, and rates on 15 year mortgages are as low as 3.5%.  The payment on this is 15 year mortgage is just $2860 per month.

Then, combine your mortgage proceeds and your available cash to purchase the $922,969 Genworth case yielding 5.5% over 28 years.  Utilize $2800 of the monthly income from Genworth for your mortgage payment, you are still left with $2000 month of income for the first 15 years.  Your house is paid off after 15 years, and your income from Genworth jumps to $4800 a month for another 10.5 years.  As a super bonus, you also have a $550,000 lump sum windfall- your entire invested principal is returned in full, and meanwhile your enjoyed 15 years of $2000/ mo and 10.5 years of $4800/mo.  That is a superb investment.

Utilizing home-equity in this way is very safe, as your mortgage payment is directly offset by your new income source, and the investment that you make yields a higher rate of return than your debt costs you.  There are home mortgage interest tax deductions to take into consideration as well that may make this even better.  For retirement investors looking to safely utilize home-equity, a strategy like the one described above is hard to beat.

It just so happens that we currently have four similar cases to the Genworth case that all would suit this strategy.  Each includes significant income streams and a lump sums.  For investors with home-equity, you owe it to yourself to make lemonade out of this lemon of a low rate environment.

Don’t let these low rates go to waste.  Grab some cheap mortgage money, and give us a call to secure one of these fantastic income with lump sum Secondary Market Annuities. In most cases, we can make arrangements to hold cases while your refinance is processing.

Excellent Deferred SMA’s

Summer  is heating up, and the deferred Secondary Market Annuities we have available this week are hot too.  For so many, just a few short years of SAFE, deferred growth can make a huge difference in planning stable income streams.  Locking in a future income stream now with a strong carrier can be a great move.

Below are selected deferred income contracts we have available.  Click the image to  see the whole list.

As you may  know, these move quickly so if there’s a deal you like, don’t hesitate to give us a call to reserve it.  They might not be available for long

Deferred Secondary Market Annuities

Also, these income + Lump Sum contracts have some attractive features.  The Prudential case #06460 is a solid long term income stream, with a decent lump sum not far out.

Deferred Income Secondary Market Annuities

If you have any questions about our Secondary Market Annuities do not hesitate to call or email.

Most of the questions we receive regularly are also addressed here: SMA FAQ

How Life Contingent Secondary Market Annuities Work

After several conversations this week with prospective buyers about life contingent secondary market annuities, I felt it was important to broadcast some information about these exciting high-yield opportunities to everyone.  The two deals that I am highlighting today are new on our list.   They might be gone soon, so if they look good, let’s chat soon! I will  quickly highlight a life contingent deal, and then explain how life contingent deals work.

The first deal is a large Prudential deal.  This deal will absolutely drench you in income for 30 years.  The final years worth of monthly payments is an astounding $17,875.56 per month- this contract pays out a total over $4 million over 30 years, on an investment of just $1.4 million today.  This astounding 6% yield simply cannot be matched anywhere.  The seller in this case is younger- in his 20s- and life insurance is already approved. 

Life Contingent Secondary Market Annuities

Life Contingent Secondary Market Annuities as of 6/27/12

The full payment stream is as follows:

4 life contingent monthly payments of $1,860.25 beginning on 09-01-2012 through and including 12-01-2012; 360 life contingent monthly payments of $1,916.06 beginning on 01-01-2013 with a 3% annual increase through and including 12-01-2042;

264 life contingent monthly payments of $7,181.79 beginning on 01-01-2021 with a 3% annual increase through and including 12-01-2042;

Plus Lump Sums:

01/01/26 = $100,000

01/01/31 = $200,000

 This is just an incredible, long-term, increasing income stream.

So how does a life contingent payment stream work?

 I am going to start out by saying that life contingent deals are not for everyone. If you don’t understand the Secondary Market for annuities, or feel unsure about handling investments, they might not be for you. They add a little bit more complexity to the secondary market annuity transaction, and honestly sometimes they do not close.  Where about one in 10 SMA transactions fail to get approved in court, we have an even lower success rate with life contingent deals.

 So with that disclaimer out of the way why am I telling you about these deals?  Because they come with a higher yield. 

 A life contingent secondary market annuity simply means that the payments due to the seller – and thereby due to you as a new buyer – depend on the seller’s life.  If the seller dies after you buy the payments, the payments will cease to be made by the insurance company. 

 Therefore, in order to make this an attractive and safe investment for you, life insurance is purchased on the life of the seller that will pay you any amount due to you under the remaining terms of your contract.

 Let’s use an example of a current deal on our list that is new today.

Life Contingent Secondary Market Annuities

Life Contingent Secondary Market Annuities

Looking at the CIGNA deal, the payments start in December of 2019.  On this deal, the first 36 payments are guaranteed.  The remaining 126 payments are contingent on the seller’s life.  In this case, the seller is a 40-year-old male. 

 The benefits statement is:

36 guaranteed monthly payments of $1,590 beginning on 12-11-2019 through and including 11-11-2022;

116 life contingent monthly payments of $1,590 beginning on 12-11-2022 through and including 07-11-2032.

 On 12-11-2022, the date of the 37th payment, your accrued principal and interest balance is $140,674.  Life insurance in excess of this amount has already been purchased by the seller, with you as the buyer of these payments to be named as a beneficiary under a collateral assignment. 

 If the seller is to pass away at any time during the life of this 14 year contract, the amount due to you under the amortization schedule of this deal will be paid to you.  If there are more life insurance proceeds than what remains owed to you, the remainder amount pays to the heirs of the seller.

Pros and cons of Life Contingent Secondary Market Annuities

Because life contingent deals are not absolute payment streams, they’re not for everyone.  Some investors do not want the uncertainty of receiving a lump sum in the future. 

However the flipside is also a possibility – receiving a lump sum might be an unexpected windfall.  It might allow you to reinvest in a different rate environment, or it may be flexibility that is a pleasant surprise.  There can be some complications purchasing life contingent deals with IRA money, so be sure to give us a call.

The important thing to look at right now is that life contingent deals have a higher rate of interest.  This reflects the added complexity, and sellers are willing to accept a higher discount rate to sell life contingent payments.

If you are seeking a higher yield, then a life contingent deal might be for you.  We do not publish all the life contingent deals available to us, so be sure to give us a call.  We can discuss your needs, and find the right deal for you.

Buying Trouble With Secondary Pensions

Frequent readers of Annuity Straight Talk updates will know that we are big fans of the secondary market for annuities. Well there’s another secondary market with high yields and assumed levels of safety but things aren’t always as they appear. I’m talking about secondary pensions, which come with a whole different set of rules and guidelines. In fact, it seems as though by participating in this market you’ll be buying nothing but trouble. Forbes published an article recently with a few horror stories. Read the article here.

Since we promote secondary annuities, it’s our duty to clarify things when something similar is peddled to unsuspecting investors. The transfer of structured settlements, or secondary annuities, is governed by federal statute, USC 5891. Court assignments are irrevocable and the transfer process has been refined to the point that it represents extreme levels of safety for consumers.

Secondary pensions, on the other hand, have laws that explicitly restrict and prohibit transfer. So when you purchase one of these, not only is there no court order, but it’s very hard to make the private-party contracts stick as well.  The original seller can simply decide to stop sending payments. The article does a good job of outlining the imminent legal issues and points to certain advisors who are misleading clients into thinking these contracts are legally binding. They are not and should be avoided at all costs.

If you’ve considered participating in the secondary market for annuities, knowledge of similar options is of paramount importance. Don’t believe anyone who tries to steer you toward a secondary pension. Let me be clear: the sale of pensions in a secondary market is strictly forbidden by law and I’d like to ensure that none of our readers makes a mistake with precious retirement assets.

Please contact us with any questions or comments. For more detailed assistance we are available by phone or email.

Thanks for your continued loyalty!

Bryan J. Anderson
Contact Us

Massive New SMA Inventory

Annuity Straight Talk is pleased to present a significant uptick in available inventory today.  We have a wide range of immediate income, lump sum, cost of living adjusted, and high quality credit deals.  These deals move fast so be sure to check the list. 

Of special note is a large New York Life contract- this is the top of the heap for credit quality, with a COMDEX score of 100 and an A++ AM Best rating.  This 15 year, increasing income stream can fund a great retirement.  Top it off with longevity insurance protection or a deferred lump sum annuity, and you have retirement income all sewn up.

 Give us a call for ideas on how you can secure your own high yield safe investment today, and see some samples below.  Get them while they last!

Secondary Market Annuities Inventory

How Safe is the Secondary Market for Annuities?

The question of safety of the Secondary Market is one  we receive frequently, especially after sending out a list of currently available offers that pique reader interest.

Quite simply, we like  structured settlement secondary annuities  because  they offer the highest yield and highest level of safety available to consumers for retirement income purposes.  They are not the simplest  transactions for buyer or agents to complete, and they are not appropriate for all situations.  For example, for older investors,  other types of annuities may have more benefits in flexibility or longevity protection.  However as planning tools with excellent  yield and safety, they simply can’t be beat.

Be sure to reference our post on the difference between Structured Settlement Annuities  and viatical (life insurance) transactions

 So now that you know why we like them in general, the question remains, is this market for real and how safe is it?

Secondary market annuities can more specifically be called structured settlements in technical terms. A structured settlement originates when an individual wins a settlement- this can be a car accident, medical malpractice, or any other sort of award.

The settlement essentially takes the same form as an annuity contract that is available to anyone who invests retirement assets with an insurance company- it’s a promise by a highly rated carrier to make a series of future payments to the individual.

In this case, rather than an individual buying those future promised with a premium (AKA an annuity), in a settlement, the losing party in the case settles their obligation by transferring a sum of money to satisfy those future payments. The sum is transferred to an insurance company who then shoulders the future market risk and court-ordered obligation to make specific payments. The winning party- usually an individual- enjoys this income stream tax-free per IRS regulations.

However, circumstances change for people, and sometimes they wish to sell their future payments for a lump sum. This is where our ”Secondary Market Annuities” originate.

Because of this slight difference in origination of funds in the settlement, there is one critical difference that separates primary market from secondary market annuities. In addition I’ll add two other reasons that will show clearly why the secondary market is a much SAFER investment.

Safety Factor #1

An insurance company becomes party to a structured settlement as part of a final court order in a lawsuit. In the unlikely event that this specific insurance company fails in the future, an existing court order compelling the company to make payments would place that liability among the company’s most senior debt obligations. And that means it gets paid out ahead of all other company liabilities. The insolvent insurance company would be held in contempt of court for failing to make payments according to the terms of a structure settlement. The stream of income provided to you via the secondary market annuity would not be affected nor have to wait for further bankruptcy or liquidation proceedings.

Safety Factor #2

And now for the somewhat less critical but also quite relevant…

Each state has an insurance guaranty fund that covers the guarantees of insurance policies and annuities for insolvent insurance companies who can’t make payments. Let’s assume your state guaranty fund covers $100,000 for annuities but you need to invest quite a bit more money to cover your retirement income needs. Within the primary market, no matter what you decide to invest, you may only be covered to the maximum limit of $100,000.

By using the secondary market, you are subject to the guaranty limits of the state where the contract was initially issued, not necessarily your state of residence. Structuring an income portfolio in the secondary market typically requires multiple deals to complete. It is quite probable that each contract will have originated in a different state, which affords you the total protection of all states involved rather than simply the limits offered in your current state of residency.

Safety Factor #3:

The risks in an SMA are generally transactional in nature- meaning, it has a risk of not closing due to the seller changing their mind or the court not approving the transfer. In both of these cases, there is no financial consequence to you if the case fails, and your deposit is fully refunded.  This happens in about 1 in 10 cases where generally a court disallows the seller from selling due to the seller’s personal situation.

Other risks in an improperly handled SMA transaction are that a payment stream could be already committed or not transferable. Our process eliminates that risk as our outside counsel reviews and will not release purchase funds until a thorough checklist is complete.

Thus the three key items that ensure legal safety are:

  1. Benefits letter from the issuer to the payee, which establishes that the Payee has the payments to sell,
  2. Court order changing the payee to you,
  3. Acknowledgement letter or stipulation agreement after the court hearing from the Issuer naming you as the new payee of the specific payment stream you purchased.

Not surprisingly, these three key pieces are what must be in place before your funds are released to a factoring company and seller, and are what constitute our closing book after a transaction is complete.

Safety Factor #4:

And finally we’re going to talk about a safeguard that is inherent to any sound retirement income plan. Any advisor worth their salt will advise you to spread your assets between several different insurance companies. While this is a great recommendation, it rarely happens because most salesmen are lazy and benefits can vary greatly between carriers to the point where it puts you at a financial disadvantage.

Because a typical case involves multiple Secondary Market Annuities, purchasing contracts in the secondary market virtually assures that you will place assets in several companies with no sacrifice to average yield or overall performance.

Summary:

A retirement income portfolio based on secondary market annuities thus offers unparalleled safety of 1) credit quality, 2) seniority status among the issuing company obligations, 3) rock solid legal review, and 4) diversity of carriers.

If you’d like to explore this profitable yet extremely safe opportunity for your retirement income plans, we’re ready for your call.

Annuity Straight Talk

1-800-438-5121

Calculating Yields in the Secondary Market

Nearly every time we send out an email with new secondary market annuity offers, several inquiries come back with people asking how the return is calculated.

The first resource is one from the vault- a piece we wrote several years ago that is just as accurate today- Which 10% Do you Want?

For more, let’s see an example that everyone can relate to…

Assume a purchase price of $282,951 where monthly income payments of $1500 begin one month from today and continue for 360 months. The effective annual yield is 5% and aggregate cash flow comes to $540,000.

Everyone has seen this similar loan and repayment amortization schedule with a conventional mortgage. With a mortgage you would be the borrower but with a Secondary Market Annuity you are essentially the lender.

The payments outlined above can be a good example of a 30 year mortgage or it could be an excellent income stream from the secondary market. Either would be calculated exactly the same way.

With Secondary Market Annuities many people want to assume that the $282,951 is simply growing at 5% for 30 years, but this is not the case, just as it is not the case with the amortizing mortgage either. Why is this? When money is paid out, the compounding asset balance shrinks.

Every payment on an amortizing mortgage is part interest and part principal, and Secondary Market Annuities are no different- each payment includes an interest earned component, plus a return of principal component.  We won’t bore you with an extensive amortization table here outlining 360 payments- if you really want it, just ask and we’ll send it over!

Alternative  Way of Looking at Secondary Market Annuities Yields:

There is another simple way to look at it so let’s have another example. Assume you placed $282,951 in a savings account earning 5% effective annual interest (unlikely, I know). If you were to withdraw $1500 per month, after 360 months you would have collected $540,000 and the account would be empty. While you are in fact earning 5% interest, you are not earning interest once the money comes out of the account.

The calculations for these returns are slightly more complicated than a simple (money ‘times’ interest rate ‘times’ time) formula. If that were the case, $282,951 growing at 5% for 30 years would compound to $1,222,886 which isn’t the case here. Money at work in the account earns interest while money in your pocket does not.

Secondary Market Annuities Yield Summary

These examples indicate that not all income deals in the secondary market are appropriate unless the structure meets specific objectives for your retirement plan. Immediate income works for some people and deferred income or future lump sum payments work for others. Which one is best for you? You must answer that question.

There are several ways to capitalize on the secondary market. What we have are above average interest rates and extremely high levels of safety, and a variety of available cash flows. The rate and safety are a compelling proposition in any economy and especially true now. The only thing to determine is what you are seeking, and then match your goal with an available offer.

To maximize the strength of this market, use the right tool for the job- don’t buy an income stream if you have no need for the payments. Instead, let it defer and accrue a few years! Likewise, don’t buy a 10 year deferral annuity if you need money every month.

Please don’t hesitate to call us if there are any specific questions you have about how the secondary market for annuities works, and for assistance selecting the right offers for your specific situation.

You can always view our available Secondary Market Annuities here, or give us a call or make an appointment to help setting your goals and matching appropriate tools for the job-

Have a great week!

Bryan J. Anderson
800.438.5121
[email protected]

Secondary Market Annuities Are Not Viaticals

At Annuity Straight Talk we encourage you to learn all you can about annuities so you can independently verify what we recommend, or what any advisor you chose to work with presents you for consideration. As many know, we often recommend Secondary Market Annuities as a very high credit quality alternative for investors seeking a yield above market for comparable safety.

Recently, a reader who inquired about Secondary Market Annuities did some research and wrote back,

Brian,

We just wanted to let you know that we are not interested at this time to purchase any SMA’s, after reading several articles about insurance company’s being able to opt out of these contracts in app. 35 states.

Thank you so much for your time.

As it’s easy to get turned around in the World Wide Web, we thought it would be beneficial for all to read our response:

The article referenced is here. It may require a registration to that site, but the registration is free.  If you don’t wish to register and want the article, Contact us and we’ll email you a copy.
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20100228/REG/302289992

Our response to the reader is as follows:

The article you referenced points to the proliferation of a ‘secondary market for annuities’ which is actually unrelated to the contracts I promote on my website. It is confusing, however, due to the similar name both transactions share.

In fact, the contracts I promote are more properly labeled ‘resale of structured settlements’ and come in the form of a payment stream (an annuity) from an insurance company.

We call them “Secondary Market Annuities” because they are annuity payment streams being bought on the secondary market. Unfortunately, regular annuities being re-sold would share the same title, and therein lies the confusion.

Secondary market annuities as mentioned in the article have to do with investors buying an annuity in the name of someone else. Why would someone do this? Because certain annuity contracts have death benefits attached to them.

Take for instance a variable annuity with a death benefit. If the owner dies when the market is depressed, a death benefit of the original investment amount plus interest will be paid to the beneficiaries.

Now, the problem with this sort of transaction is that groups of wealthy investors and attorneys got together and solicited terminally ill people. The investors purchased annuities with a death benefit while naming themselves beneficiary and a terminally ill individual the owner. It offered a risk-free way to invest in the market by leaving the insurance company on the hook for a death benefit.

The problem is that it went contrary to the spirit of offering protection for people saving for retirement while trying to protect family members. It falls in the same category of transaction as ‘stranger oriented life insurance’ and other viatical transactions.

Many regulators felt that investors were taking advantage of terminally ill people and the result was a series of laws that allowed insurance companies to cancel certain benefits if contracts were transferred. I personally believe that was the right thing to do. Contractual guarantees are put in place for very good reason and I feel any effort to exploit that should be stopped.

But comparing those “stranger originated transactions” to the structured settlements we promote at Annuity Straight Talk is like comparing apples to oranges, as they say.

The transfer of the Secondary Market Annuities we sell- more properly labeled ‘resale of structured settlements’- is regulated by an act of Congress in 2001 that produced HR 2884 and is found in Internal Revenue Code 5891. As of 2008, all but a small handful of states enacted laws governing transfers to mirror the federal statute.

In summary, the legislation and tax guidance cited states that a structured settlement may be resold and that if it follows a proscribed process involving the Court in the state where the original settlement originated, that the transfer of payments would retain its tax treatment and not be subject to a penalty taxation.

As a result, each of the transactions we promote has a Court date wherein the transaction needs to be reviewed and approved. Court orders must be in place and all documents reviewed and approved prior to funding.

The transfers we promote receive a substantial amount of due diligence from our legal counsel for your benefit and ours. As such they offer the highest levels of safety and retirement income efficiency. Each case is treated with exhaustive care and the result is the greatest amount of benefit for our clients, all firmly within the confines of state and federal laws.

It’s critical to perform due diligence and this article (cited above) is important if you are considering the purchase of a stranger-oriented life insurance policy or an annuity contract on the secondary market with a death benefit attached to another party’s life. But it’s equally important to understand the differences between that marketplace and the structured settlement market.

We hope this discussion and links are useful to our readers. We welcome any additional thoughts or questions- simply email us or leave a comment below.

** You may also wish to reference this post with more detailed information on the safety of Secondary Market Annuities.

Great Short-Term SMAs Available Now!

From what I’ve heard, the information shared over the last few weeks regarding the secondary annuity market has helped several people gain a greater understanding of this product class. Stepping into a little-known niche of the financial markets is a major transition for anyone. Understanding all that goes into a serious financial commitment is essential to making a calculated decision.
 
Because the inventory changes so quickly at times it is my job to let you know where the value is with what is currently available. Most of you have unique objectives so I’d like to highlight one specific area where this market offers fantastic opportunity.
 
Right now, the short-term deals are hot! Without the commitment of long-term deferred income or lump sum payments, you can secure exceptional rates on three to nine year contracts. Today, those contracts are yielding 4.75%-5.75% in comparison to the rates on CDs and Money Market funds that run between 1% and 3%.
 
For instance, here are a few quality short-term deals…
 
·         $66,906 will grow to $75,000 in three years for an effective yield of 4.75%
 
·         $194,842 will grow to $240,000 in four years for an effective yield of 5%
 
·         $57,733 will grow to $83,000 in seven years for an effective yield of 5.5%
 
And that’s just a small sample of the available contracts…
 
This is an easy decision to make. With so many people unsure of how to allocate capital in a volatile market, many have decided to play it safe. Well, here’s your safety with a little yield to go with it. All of this in a shorter time frame that will give you plenty of flexibility for any changes that may come in the stock market or economy.
 
Check out the current inventory now and see for yourself. Call or email immediately to reserve a deal that suits your situation.
 
If this is the type of investment that works for you but you don’t see anything that fits just right, please let me know to keep an eye out for the perfect deal so it doesn't slip away.
 
Have a great week!
 
Bryan J. Anderson
800.438.5121

[email protected]