Secondary Market Annuities are available to individuals through our Advisor Partners. Please contact us for a referral to an Advisor near you.
For investors in the last few years before retirement, safety is the number one priority. Preserving your assets in a period of market volatility and protecting against loss is critical. However, safe money options like Treasuries and CDs offer painfully low yields.
Other safe money options like fixed annuities and index annuities offer compelling safety characteristics, but for many investors, the surrender schedules, growth components, and poor yield, may make these options less appealing.
Thankfully, there is a higher yield, safe money alternative asset class to choose from.
Secondary Market Annuities are Discounted Cash Flows. They are period certain guaranteed payments backed by annuities originally issued in conjunction with structured settlement awards. The annuities are issued by top rated insurance carriers. DCF Exchange acquires these assets in a court ordered transfer procedure from numerous sources of origination nationwide. DCF Exchange completes critical legal review, due diligence and aggregation services to make these assets available directly to institutions and individuals through its advisor relationships.
Read on to learn more about how structured settlement payments become the Secondary Market Annuities we make available here at DCF Exchange.
A structured settlement is typically an award won by an individual in a court case or private legal settlement. When the plaintiff elects to receive his or her payments over time, the result is a structured settlement. The insurance company pays the settlement to the plaintiff in the form of an annuity, and is legally bound to make a fixed series of future payments.
Which insurance carriers back these annuities?
Typically, insurance companies such as MetLife, Travelers, Symetra, Prudential, and John Hancock are the names associated with these structured settlement obligations. These companies have longstanding high quality credit histories, and are well positioned to make payments to the individual payees 10, 20, 30+ years into the future.
However, circumstances sometimes change for the recipients of structured settlement payments. Owners of these payment streams may wish to sell this future income for cash today.
Through an established legal process guided by federal and state law, DCF Exchange is able to purchase payments from individual sellers and in turn make them available to you.
What is a Secondary Market Annuity?
The term ‘Secondary Market Annuity’ refers to structured settlements, immediate annuities, and lottery payments that are sold through specialty finance factoring companies by the original recipients of these payment streams.
The term ‘Secondary Market Annuity’ is easier to say than ‘Factored Structured Settlement’ or ‘Previously Owned Annuity’ or even ‘In Force Annuity’ and thus SMA has become an industry standard.
It’s important to clarify up front, however, that the Secondary Market Annuities we sell are not viatical transactions. That is, they are not life insurance transactions such as re-sold variable annuities with death benefits tied to another party’s life.
Rather, the most common SMA is much like a period certain multi-year guaranteed fixed annuity. But unlike newly issued annuities with yields in the 2- 3% range, these secondary contracts come with effective rates of 4%, 5%, 6%, or even more, and come from top rated carriers.
So who is a typical buyer of a Secondary Market Annuity?
Secondary Market Annuities are great for safety-conscious investors seeking a safe investment with a fixed series of payments that handily beats today’s rates and inflation.
If you’re currently in CD’s, cash, and bonds, and not happy with the yields yet not willing to shoulder risk, then a Secondary Market Annuity is a great option to consider.
If you’re looking for safe income you can depend on, there’s currently no higher yielding way to lock in long term appreciation than with a Secondary Structured Settlement.
And when you look at long term rates of return in the stock markets, these Structured Settlements are extremely competitive and yet they completely remove all volatility and risk of loss.
Compare Secondary Market Annuities To CD’s:
CD’s are affectionately known as “Certificates of Disappointment” these days. Yields are so low that you are likely losing ground to inflation. A CD is a place to store cash for a short term- it is NOT an investment in this marketplace.
If you’re in a 5 year CD paying 2%, you should look into a 5 year short term lump sum SMA, whose rates are from 3.5% to 4%. Now, rates move with markets, so these are subject to change, but….
The comparison is clear- SMA’s pay more and cost less.
Compare To Period Certain Immediate Annuities:
Period Certain Immediate Annuities are simply fixed term fixed payout contracts, such as 20 year payment. You purchase a defined income stream from an insurance company, and they hold all the investment risk and must make the payout no matter what.
**I’m specifically NOT talking about lifetime income annuities like Immediate Annuities or Hybrid or Index annuities with riders. That’s another topic entirely explored elsewhere on the site.
Period certain annuities are what defendants ultimately purchase to fund structured settlements. With an SMA, you’re simply buying a period certain annuity, but AT A DISCOUNT.
At current market rates, 20 year period certain annuities reflect an approximately 2% effective rate of return.
With Secondary Market Annuities, a 20 year immediate income deal would have an effective rate of return between 4.25% and 5.25% depending on the deal and the situation.
The comparison is clear- A Secondary Market Annuity pay more and cost less.
Compare To Bonds and Treasuries:
Bonds, including Muni bonds, Corporate Bonds, and Treasuries, all carry one critical and terminal risk- loss of principal. As interest rates fall, bond prices go up…… and when rates rise, prices fall.
When buying a bond you are buying the yield. But if you need to liquidate the bonds and the rates have risen, your principal value has diminished greatly. You lose money.
Many people don’t really ‘get it’ when it comes to bonds- they think it’s safe, when really, it’s not.
Instead, consider a high yield fixed investment in an SMA. Secondary Market Annuities offer excellent yields and fixed terms.
The comparison is clear- A Secondary Market Annuity offer a higher yield, without the risk of principal loss.
Why We Do It
The DCF Exchange helps savvy institutions and investors earn uncorrelated, guaranteed yields in a unique “set-and-forget” product.