The discount rate is the rate at which your future payments are discounted to reflect the time value of your money. When you decide to sell your annuity, the amount of your future annuity payments are added up, and then discounted by a certain percentage.
Don’t confuse discount rates with interest rates! When investing, you want interest rates to be high. The opposite is true when you are selling your annuity: lower discount rates are better because you will receive more money. Essentially, the lower the discount rate, the greater the present value of your annuity.
And, the great news for people considering selling their annuities is that lower discount rates now mean it’s a great time to explore turning your annuity into cash you can use for those unexpected expenses.