Millions of Americans have purchased annuities for life planning and predictable income.  While steady income is reassuring, sometimes it can be a burden if you need to access a larger lump sum of cash for potential investments and expenses.

 

Many people who have or are considering annuities are concerned about credit risk.  In other words, there are concerned about will happen to their annuity if the insurance company that provided the product goes out of business.  While you think your insurance company may be stable, evaluating your cash options can never hurt.

 

Before taking any action to cancel or replace your current annuity, you should first ask yourself several questions:

 

Are you ready to use the lump-sum of cash for the right reason(s)? Will this liquidated annuity meet your cash needs now?  Is the return on the lump sum make fiscal sense?

 

Annuities may not be appropriate anymore when you have not established an emergency fund to cover living expenses for at least three to six months.  Similarly if you have not contributed to other more tax-advantaged retirement accounts, such as a 401(k), 403(b), Roth IRA, etc or plan on receiving the money before age 59 ½.  But the most often cause to accelerate your annuity into cash is when you are not sure that you are able to meet planned future expenses (house down payment, renovations, expenses, etc.) with other funds.

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