The odds are very good that you will have a very straightforward goal in mind when you decide to start shopping for a Secondary Market Annuity (SMA): to make the best choice at the ideal price and that you’ve done the right thing for your circumstances.

For some people, it appears to be simple enough, but for many others, the SMA shopping endeavor can seem really intimidating.

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To help you get started in an organized manner, we’ve broken the process down using 10 essential tips. By paying attention to each of these essential tips, you will be more informed and prepare to make a successful annuity purchase decision.


The Preparation Strategy


Using a preparation strategy will allow you to understand the process and allows you to get off to a very good start.


Tip #1 Be Patient


Purchasing a secondary market annuity is a pretty big decision. Make certain that your reason to buy an SMA makes sense for you and always avoid circumstances that could make you feel pressured to make a decision. Planning for retirement should not be “hit and miss” and therefore requires a well-thought-out strategy. Take advantage of the experience and knowledge of a good advisor who is also willing to give you the time to make a decision that is comfortable for you.


Tip #2 Consider Multiple Products


There are various types of SMAs and the first one you look at probably won’t meet your needs. Convince your advisor to educate you about comparing apples to apples and be sure to explore as much of the SMA marketplace as possible. To reduce your research time, you can always ask your advisor to prepare a list of recommendations based on your financial goals and circumstances.



Tip #3 Speak with Your Spouse and Beneficiaries


Purchasing a Secondary Market Annuity typically requires significant resources so it’s typically a good idea to include all those who will be affected by your decision to become part of the conversation. Your family must be comfortable talking about retirement planning and understand that it is a process that involves strategies and goals.


Tip #4 Don’t make Your Secondary Market Annuity a singular Retirement Strategy


Purchasing an SMA can be a very good component in your retirement strategy but rarely should it be the only component. You will always need immediate access to emergency funds so make sure you have some set aside for emergencies.


Tip #5 Diversity is Key


It makes very good financial sense to diversify your annuity investments. Most highly-rated insurance carriers have a successful track record with annuity products but keep in mind that your investment is not insured through the FDIC and is therefore vulnerable if your insurance company runs into financial trouble. You can mitigate this exposure by spreading your investment business over several different insurance companies.



Tip #6 Watch out for Media Hype


The internet is typically a great source for financial information as long as you can work through the differing opinions of the writers who are posting financial articles. For every article you read about the benefits of Secondary Market Annuities, you’ll also find an article that conflicts with the positive one.

Typically, when there are considerable differences of opinions, they’re coming from someone who is selling competing products.


It’s Your Money so Ask Questions


Tip #7 Find out which type of Annuity is Right for You


Although Secondary Market Annuities typically serve an important part in retirement planning, it’s important to understand that there are various types of annuities that may work better under your individual circumstances. Make sure you ask how each type of annuity compares to the other so you will know what to buy and why to buy it.

The various types of annuities to compare are Single Premium Immediate Annuities, Deferred Annuities, Deferred Multi-Year Annuities, and Fixed Index Annuities.


Tip #8 What’s the Interest rate and how long is it Guaranteed?


Interest rates are structured differently depending on the type of annuity and the insurance company that is underwriting it. Make certain you understand the rate your SMA is offering and whether or not it could change over the term of the contract.


Tip #9 What about your Beneficiaries


This could easily be the most important question for you to ask. If you are considering beneficiaries, make certain that you discuss this with your advisor so you will completely understand what happens to the balance of annuity payments in the event of your death.


Tip #10 What is my Tax Liability on an SMA?


When it comes to any tax liability, certainly your accountant will be the best person to speak with. Understand that SMAs are typically treated differently than traditional annuities and you might not receive a 1099 from the insurer. Knowing this, it is your responsibility to report this income appropriately.



The Bottom Line


There are many types of annuities in the marketplace and our firm has found over time that Secondary Market Annuities typically deliver more income on your investment. If you are considering making annuities a part of your retirement portfolio, call the professionals at Structured Wealth Strategies for the information you need to make an informed decision. We are always happy to make ourselves available to prospective clients and we look forward to hearing from you.



You can reach us at (800) 595-1130 during normal business hours, or please contact us through our website at your convenience.

Frequently Asked Questions

What are Secondary Market Annuities?

SMAs are annuity contracts that are sold by their original owner to a third party. The third party purchases the future payment stream from the annuity at a discounted rate and assumes the right to receive future payments from the annuity.

How are SMAs different from primary market annuities?

Primary market annuities are purchased directly from the insurance company that issues the annuity. SMAs are already owned by someone else and are being sold in the secondary market.

What are the risks associated with investing in SMAs?

Like any investment, there are risks associated with investing in SMAs. The primary risk is the creditworthiness of the original annuity issuer. If the issuer defaults, you may not receive all of the future payments you were expecting.

Are SMAs regulated by the SEC?

SMAs are not regulated by the SEC because they are not considered securities. However, they may be subject to state securities laws.

Is a Secondary Market Annuity suitable for everyone?

No, SMAs are not suitable for everyone. They are typically sold to accredited investors who understand the risks associated with investing in SMAs and have the financial means to absorb any losses that may occur. It is important to consult with a financial advisor to determine if SMAs are a suitable investment for you.

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The information and materials on our website are provided for general informational purposes only and do not constitute professional advice or recommendation. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability of the information, products, services, or related graphics contained on our website. Any reliance you place on such information is therefore strictly at your own risk.

Curt Gibbs