Individuals often use annuities to save for retirement or supplement other retirement plans. These insurance products allow for investors to create an account that they can convert into guaranteed payments at a later date. Annuities are also used by insurance companies to settle claims and lottery commissions to pay out jackpots.

Annuities are typically funded by individuals through periodic payments, though they can be funded with a single premium. There are two types of annuities, fixed and variable. A fixed annuity has a guaranteed minimum interest rate and has a safe, consistent growth rate. Variable annuities are tied to the stock and bond markets and their returns will vary with market prices.

Once money is invested into an annuity, it is very difficult and costly to get the money out of the account. An early withdrawal penalty imposed by the insurance company (as high as 10 percent in some instances) and an IRS early withdrawal penalty will often be imposed if money is taken out of the annuity. Once the annuity is converted into payments, an annuitant cannot access money in the account. The only way an annuitant can gain access to the money funding the payments is to sell future annuity payments.

In order to access future payments, the annuitant needs to sell them. This allows the annuitant to use the future payments as collateral to get immediate cash. There are a variety of businesses that will help individuals with this need or desire. They will provide immediate cash in exchange for your future payments. If you are receiving a structured settlement annuity, this may require a court order. The business you are working with will know what is required to go through with the transaction.

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