What Our Customers Ask Before Buying Secondary Market Annuities
Transferred structured settlement payments form an important part of the financial landscape. By acquiring future payments from recipients of structured settlements, we provide liquidity and options to individuals with otherwise inflexible and locked in financial arrangements. And in so doing, we provide a higher yield, high credit payment stream to buyers.
Properly structured and legally reviewed by our affiliate wholesale firm, DCF Exchange, these instruments offer a great guaranteed income alternative to today’s yield-starved investors. Advisers and individuals alike should take a close look at these high-yield, high credit quality safe-money alternative investments.
Here are a few frequently asked questions that our buyers typically ask:
Think of secondary market annuities as “recycled” insurance contracts with just a few miles on them.
Here’s how they work:
When someone wins a personal injury lawsuit, they often choose to receive guaranteed payments over 10, 20, or 30 years instead of a single payment as a settlement. These structured settlement payments come from top-rated insurance companies like MetLife, Berkshire Hathaway, and New York Life.
But life happens. Sometimes people need cash now instead of waiting decades for their payments.
That’s where the secondary market comes in. These payment recipients can sell their future structured payments at a discount through court-approved transactions. We buy these recycled annuity payment streams and make them available to investors like you.
What you’re getting:
- The same guaranteed payments from the same A-rated insurance companies
- Court-ordered legal protection backing every payment
- Higher yields than new-issue annuities (typically 1-3% better)
- No market risk or volatility
Think of it like buying a barely-used luxury car. Same manufacturer, same reliability, same car – but at a 10-15% discount because someone else drove it off the lot first.
The insurance company doesn’t care who receives the payments. The math doesn’t change. You just get a better deal because you’re buying recycled settlement payments instead of brand-new contracts.
It’s that simple. You’re stepping into someone else’s guaranteed income stream at a discount.
Absolutely, and this is one of my favorite features because it gives you complete control over your investment size.
Here’s the deal:
See a great income stream paying $2,000/month but you only want $1,000/month? We split it in half. Want just a piece of a $200,000 lump sum? We can carve out exactly what you need.
Real example:
Let’s say we have this Prudential payment stream:
- Original: $330,377 investment for $619,362 total payout, 6.175% Yield
- 18 payments of $2,020, then 265 payments of $2,200
If you only want to invest $165,000, we split it:
- Your piece: $165,189 investment for $309,681 total payout, 6.175% Yield
- 18 payments of $1,010, then 265 payments of $1,100
Same 6.175% Yield yield, same insurance company, same time frame – just sized to fit your budget.
What we can split:
- Monthly payment amounts (bigger or smaller)
- Lump sum sizes (down to $10,000 minimums)
- Start dates (you can take the first 10 years, someone else gets the last 10)
What we can’t change:
- Payment frequency (monthly stays monthly)
- End dates (20 years stays 20 years)
- The insurance company or yield
Why this matters:
Maybe you’ve got exactly $75,000 in an IRA rollover, or $35,000 sitting in a CD. Instead of trying to find a payment stream that happens to match your exact amount, we make the inventory fit your needs.
It’s like having a tailor for your investments.
This is where a lot of people’s eyes glaze over, but it’s actually refreshingly simple – especially if you have any sort of business, finance or math & engineering background.
We use basic Discounted Cash Flow (DCF) math. It’s the same calculations used for mortgages, bonds, and business loans. No smoke and mirrors.
Here’s the deal:
You pay less today for guaranteed payments tomorrow. The difference between what you pay and what you receive is your yield over time.
Let’s say you pay $90,000 today for $1,000 per month starting in 1 month, and lasting for 10 years. That’s $120,000 total coming back to you. Your investment of $90,000 is the Net Present Value (NPV) of those future 120 monthly payments, at the discount rate, or Internal Rate of Return (IRR), of 6.2%. You can do this math in any financial calculator or in Excel.
Each payment has two parts:
- Principal – your original money coming back
- Interest – your profit
With a traditional amortization schedule, early payments are mostly interest. Later payments are mostly principal. Just like a mortgage, but you are the lender.
With Secondary Market Annuities, using our proprietary Payments Table you can recognize more principal return early on and more interest income later. Check out the Taxes page for more details.
The beauty of this approach:
Unlike traditional annuities with their confusing “crediting methods,” “participation rates,” and “caps,” our math is completely transparent. You can verify every number with any financial calculator or Excel spreadsheet.
We show you the exact payment schedule. You can download it. Check our work. Run the numbers yourself.
No projections. No “what-ifs.” No market performance assumptions. Just guaranteed payments from A-rated insurance companies using math that’s been around for centuries.
If you can understand a mortgage payment, you can understand this.
Absolutely, and this is often the smartest way to buy these payment streams.
Here’s the deal:
You can purchase these through a self-directed IRA, which means everything grows tax-deferred until you take distributions. We work exclusively with GoldStar Trust because they know this asset class inside and out, and their fees are the most competitive.
Why IRA purchases make sense:
Instead of paying taxes on the interest portion of each payment, everything accumulates in your IRA tax-free. You only pay taxes when you take distributions – just like any other IRA investment.
The process is simple:
We’ll help you set up the self-directed IRA if you don’t already have one, then guide you through rolling over funds from your existing 401(k) or IRA. The whole thing stays IRS-compliant, and we handle the complexity.
Costs to consider:
While the payment streams themselves have no ongoing fees, your IRA custodian does charge annual fees. GoldStar’s fees are reasonable and transparent – no surprises or hidden costs.
Tax-deferred accumulation:
Even when your payment streams generate monthly income, it all stays in the IRA growing tax-deferred. You can reinvest those payments into additional streams or let them accumulate for future use.
Bottom line:
If you’re using retirement money anyway, why pay taxes on the gains each year when you can defer them until retirement? It’s a no-brainer for most people.
COLA stands for Cost of Living Adjustment, and it’s one of the smartest features you can get in a payment stream.
Here’s how it works:
Instead of getting the same payment amount for 20 or 30 years, your payments increase annually – typically by 3% each year.
Real example:
Let’s say you buy a 30-year income stream that starts at $3,500 per month with a 3% COLA:
- Year 1: $3,500/month
- Year 2: $3,605/month
- Year 3: $3,713/month
- By year 30: $8,248/month
Why this matters:
Remember when a Coke cost 50 cents? That’s inflation at work. Without COLA, your $3,500 monthly payment in 2025 might feel like $1,500 in purchasing power by 2045.
The trade-off:
For the same $100,000 investment, you get lower starting payments with COLA because the money is spread across those future increases. You might get $800/month starting that grows to $2,000/month, versus a flat $1,000/month for the same period. Same yield, but more total payout and growing with more on the back end.
How to spot them:
On our inventory page, COLA streams are clearly marked. You can download the complete payment table to see exactly how much your payments will be each year.
My recommendation:
If you’re buying income that won’t start for several years, or if the payments will last more than 10 years, seriously consider payment streams with a COLA. Your future self will thank you when grocery prices have doubled but your income has kept pace.
It’s like buying insurance against inflation – and given what we’ve seen lately, that’s not a bad idea.
If you’re exploring higher-yield alternatives without compromising safety, this might be exactly what you’re looking for. Here’s how it actually works:
Step 1: Discovery call
We’ll discuss how these payment streams can work within your financial strategy. During this conversation, we’ll help define your objectives – whether you need immediate income, long-term growth, or portfolio diversification.
Step 2: Review available payment streams
Once we understand your goals, you’ll select from our current inventory of guaranteed payment streams. We can assist in choosing the best fit and can split, customize, or adjust available options to meet your specific needs.
Step 3: Streamlined purchase process
After selecting your investment, we’ll provide complete documentation about the payment stream you’re purchasing and establish your accounts with our payment servicing partner. For IRA purchases, we’ll help you set up a self-directed account and ensure full IRS compliance.
What happens next:
You wait for your first payment and realize this actually works exactly like I said it would. Then you come back for more.
This approach offers an optimal balance of higher yields and institutional-grade security, providing consistent returns with complete transparency.
Your payments don’t die with you – they keep going to whoever you want them to go to.
For regular (non-IRA) purchases:
If you own the payment stream in your name or jointly with your spouse, it passes according to your will. Your heirs just need to send a copy of your death certificate and will to the payment servicing company, and they’ll update the banking information. The payments keep flowing.
For IRA purchases:
If you bought through a self-directed IRA, it goes to whoever you named as your IRA beneficiary. The payments keep going into the inherited IRA account. Your beneficiary can then decide whether to keep collecting the payments or sell the stream for cash.
Trust purchases:
If you bought in a trust name, the payments keep going to the trust according to your trust documents. New trustees can manage everything seamlessly.
What if your heirs want cash instead?
No problem. We routinely buy payment streams back from heirs who’d rather have a lump sum than wait for payments over time. We’ll give them a fair market value quote based on current interest rates.
The bottom line:
These are assets that transfer to your heirs just like any other investment. The difference is they’re guaranteed to keep paying regardless of what happens in the stock market, real estate, or anywhere else.
It’s actually one of the cleanest ways to leave guaranteed income to your family. If you set it up right in the beginning, there are no probate hassles with the payments themselves – they just keep coming like clockwork.
Let’s be honest – these aren’t as liquid as your checking account. But you’re not completely stuck either.
The reality check:
These are period-certain payment streams. You can’t just call up and cash out like a CD or sell shares like a stock. That’s the trade-off for getting higher yields with no market risk.
But here’s what you can do:
We routinely buy payments back from customers or their heirs. Life happens – maybe you need cash for medical bills, want to help a grandkid with college, or just changed your mind. We can usually work something out.
The catch:
The buyback price depends on interest rates when you want to sell. If rates have gone up since you bought, you’ll get less than you paid. If rates have gone down, you might get more. It’s basic bond math.
No partial sales:
You can’t sell half your payment stream and keep the other half. It’s all or nothing. The payment servicing gets too complicated otherwise.
What most people do:
They hold to maturity and collect every payment. That’s really the point – guaranteed income you can count on. But knowing there’s an exit option gives peace of mind.
My advice:
Don’t buy these if you think you’ll need the money back in the next few years. But if you’re committed to the income plan, the liquidity question becomes academic.
Think of it like a CD with a really good buyback option instead of early withdrawal penalties.
This is actually simpler than opening a bank account, but let me walk you through it so there are no surprises.
Step 1: Browse the inventory
Start by looking at our current payment streams online. You can download payment tables, see exact yields, and get all the details for any listing. Everything’s transparent – no hidden information, no “call for pricing” nonsense.
Step 2: Questions? Let’s talk
If you want to discuss your situation, understand how something works, or need help choosing between options, schedule a call with me. This isn’t required, but it’s available if you want the guidance. I’d rather you understand what you’re buying than guess.
Step 3: Reserve what you want
Found something you like? We’ll put a 48-hour hold on it while you think it over, talk to your spouse, or run it by your CPA. First-come, first-served market, so the hold gives you time to decide.
Step 4: Simple paperwork
If you’re moving forward, I’ll send you a closing book via DocuSign. It’s got all the legal documents, payment schedules, and court orders. Download it, read it, ask questions. Don’t just click through – this is your money.
Step 5: Fund and close
Wire your money to the escrow account (or we’ll help set up your self-directed IRA if you’re using retirement funds). Once everything’s funded, you’re done. The payment servicing company takes over from there.
Timeline:
The whole process usually takes a week or two, depending on whether you’re using IRA money or cash.
What happens next:
You wait for your first payment and realize this actually works exactly like I said it would. Then you come back for more.
One of the most important decisions you’ll make when purchasing payment streams is how to title the ownership. This affects taxes, estate planning, and what happens to your payments when you pass away.
YOUR TWO MAIN OPTIONS:
OPTION 1: JOINT TENANTS WITH RIGHT OF SURVIVORSHIP (JTWROS)
- Title: “John Smith and Mary Smith JTWROS”
- Benefits: Automatic spousal transfer, no probate for spouse, simple setup
- Drawbacks: Goes through probate when both spouses die
- Best for: Married couples without trusts
OPTION 2: TRUST OWNERSHIP (RECOMMENDED)
- Title: “The Smith Family Trust, dated [date]”
- Benefits: Avoids probate entirely, cleaner heir transfer, trustee manages per your wishes
- Requirements: Existing trust, proper titling from start
- Best for: Anyone with significant assets or long-term streams
REAL EXAMPLE: WHY THIS MATTERS
I’m buying 8 payment streams from heirs whose father forgot to change legal titling from personal to trust name (though he did set up trust payments). Normally = 6+ months probate. What’s saving them: trust bank account + will proving transfer. Closing in days Vs Months.
MY RECOMMENDATIONS:
- Married couples: Start JTWROS, transition to trust later
- Long-term streams (15+ years): Trust titling from start
- IRA purchases: Self-directed IRA owns the stream
PRACTICAL STEPS:
- No trust yet: Use JTWROS, transfer to trust later (easy process)
- Have trust: Title in trust name, set up trust bank account
- Direct Deposit account: Can use a personal account initially, and change to a trust account later
WHAT HAPPENS WITHOUT PROPER PLANNING:
- Personal titling: Payments may require probate delays/fees
- Trust titling: Payments continue uninterrupted, clean transfer
Bottom line: Start with trust titling if you have one, JTWROS if you don’t. Getting it wrong is expensive and time-consuming for your heirs.
Questions about titling? This isn’t legal advice—consult your estate attorney for trusts. I can guide you on payment stream titling specifics. Worth discussing to get it right from the start.
Nobody likes talking about taxes, but let’s get this straight because it’s actually pretty simple.
The good news first:
You won’t get a 1099 form in the mail. The insurance companies don’t issue them for secondary market annuity payments. But that doesn’t mean it’s tax-free money.
Here’s how it works:
Each payment you receive has two parts:
- Principal – your original investment coming back (not taxable)
- Interest – your profit (taxable as ordinary income)
We do the math for you:
Every payment stream comes with a detailed payment table showing exactly how much of each payment is principal versus interest. You can download this complete breakdown right from the inventory page before you even reserve a case. Your tax preparer will love this – it’s all laid out clearly.
IRA purchases are different:
If you buy through a self-directed IRA, the whole thing grows tax-deferred. You don’t pay taxes until you take distributions, just like any other IRA investment. This is often the smartest way to go.
Real example:
Let’s say you invest $80,000 and get back $120,000 over 10 years. That $40,000 difference is your taxable interest, spread out over the payment schedule. Our payment tables show you exactly when you’re getting principal versus interest, maximizing your tax deferral.
Bottom line:
The tax treatment is straightforward and predictable. No surprises, no complicated calculations. Just basic income tax on the interest portion.
Talk to your CPA, but most find this refreshingly simple compared to the tax nightmares of other investment products.
Look, I’m not going to blow sunshine and tell you there’s zero risk. But let’s put this in perspective.
What you’re actually buying:
You’re stepping into payment streams that are already funded, already paying, and already guaranteed by some of the strongest financial institutions on the planet. We’re talking MetLife, Berkshire Hathaway, New York Life – companies that have been around for over a century.
The legal protection is rock-solid:
These aren’t just promises. They’re court-ordered assignments. A judge has ruled that these payments must be made. The insurance company has acknowledged the transfer. It’s all documented, reviewed by attorneys, and compliant with all state and federal laws.
Here’s what makes me sleep well at night:
I buy every single payment stream before offering it to you. I’ve got $15 million of capital at risk. If I wouldn’t own it myself, I won’t sell it to you.
The track record speaks for itself:
In 14 years and over half a billion dollars in transactions, no customer has ever lost a penny. Not one.
Compare this to alternatives:
- Bonds? They fluctuate with interest rates and can default.
- Stocks? We all know how that roller coaster works.
- New annuities? Same insurance companies, but you’re paying retail prices.
The biggest risk?
Honestly, it’s the US mail. Sometimes payments are a few days late because the post office isn’t perfect. That’s about as exciting as it gets.
These recycled settlement payments are as close to “set it and forget it” as you can get in the investment world.
This is the question everyone asks, and I get it. When something sounds too good to be true, it usually is. But here’s the thing – this isn’t too good to be true. It’s just basic economics.
The “used car” principle:
Drive a brand-new car off the lot and it immediately loses value, even with 10 miles on it. Same car, same reliability, same warranty – but now it’s “used” so you can buy it cheaper.
That’s exactly what’s happening here.
Someone needs cash now:
The original payment recipient has a perfectly good structured settlement paying them over 20 years. But they need money today – maybe for a house down payment, medical bills, or starting a business. They can’t call the insurance company and cash out (IRS rules won’t allow it), so they sell at a discount.
You benefit from their situation:
They get their cash. You get their guaranteed payment stream at a discount. The insurance company doesn’t care who gets the checks – they just keep paying as scheduled.
Remember- Insurance companies aren’t issuing new contracts at these rates.
MetLife isn’t suddenly offering 6% yields on new annuities. But they’re still obligated to pay the old structured settlements at the original terms. When someone sells those payments, they take the discount, but you can step in and get a higher yield.
Wall Street knows this:
Why do you think companies like J.G. Wentworth spend millions on TV ads? They buy these recycled settlement payments, bundle them up, and sell them to institutional investors for hundreds of millions. We’re just cutting out the middleman and offering them directly to you.
It’s not magic. It’s just a secondary market that most people don’t know exists.
Look, this is a completely legitimate question. Even my biggest customers – the ones who’ve invested millions with me over the years – ask this when they have leftover cash or small IRA balances they want to put to work.
The practical minimums:
- Lump sum payments: typically $10,000 minimum
- Income streams: usually around $500/month minimum payment size
How most people actually start:
The majority of my customers start with $25,000 to $50,000 to test the waters. They want to see how it works, get comfortable with the process, and watch those first few payments hit their account exactly as promised.
Then something interesting happens – they come back for more. My average customer ends up investing around a million dollars over several years because they realize this actually works.
The flexibility factor:
We can split almost any payment stream to fit your situation. Maybe you’ve got $35,000 in an IRA rollover, or $75,000 sitting in a low-yield CD. We can carve out exactly what you need from larger payment streams.
Why the minimums exist:
There’s real legal work involved – court orders, attorney reviews, documentation. Below certain thresholds, the transaction costs don’t make sense for anyone.
Even my million-dollar customers:
They still buy $20,000 or $30,000 pieces when they need to fill gaps in their income plans or deploy excess cash. It’s about finding the right fit, not the biggest transaction.
Bottom line:
If you’re serious about guaranteed income and have meaningful capital to deploy – even if it’s just to start – we can make something work.
I’m not going to sugarcoat this – every investment has risks. But let’s be honest about what they actually are instead of hiding behind legal disclaimers.
The big one: Carrier risk
What if MetLife or Berkshire Hathaway goes bankrupt? Look, if companies like that are failing, we’ve got bigger problems than your annuity payments. These are some of the strongest financial institutions on the planet. But yes, it’s theoretically possible.
Inflation risk
Your payments are fixed. They do go up with COLA deals, but if we get 1970s-style inflation, your purchasing power gets eroded. That’s why I often recommend payment streams with cost-of-living adjustments (COLAS) for longer-term income.
Liquidity risk
This is the big one most people don’t think about. You can’t just call up and cash out like a CD. These are period-certain payments. We can buy them back from you, but the price depends on interest rates at the time. If rates have gone up, you’ll get less than you paid. It’s best to go into this buying the financial outcome you want… the income, the lump sum, the deferred income… When you consider it a yield-to-maturity investment, you eliminate the liquidity risk. Don’t put all your eggs in one basket.
Mail risk (seriously)
The most common “problem” we actually see? Payments getting lost in the mail. The insurance companies still use regular mail to send checks. Sometimes they’re late. Sometimes they get lost. We handle the stop-payment and reissue process, but it’s annoying.
What we don’t have:
- Market risk (no stock market roller coaster)
- Credit risk from sketchy borrowers
- Management risk from fund managers making bad decisions
- Reinvestment risk when rates change
Bottom line:
These are about as boring and predictable as investments get. The biggest risk is probably that you’ll be disappointed by how uneventful they are.
Reach out to us if you’d like to:
- Schedule a 1-on-1 video call to discuss your specific needs and situation
- Ask questions about products, carriers, or Secondary Market Annuities in general
- Discuss how Secondary Market Annuities may (or may not) fit into your portfolio
Nathaniel M. Pulsifer, President, DCF Exchange and SecondaryAnnuities.com
(800) 246-1932 | [email protected] | Linkedin
