I am very excited to co-host a HUGE giveaway today, check out at the end of the post how you can win entries by liking Reach Financial Independence’s FB page, subscribing to my RSS feed and many more! There is $1000 to win, yes, you read that right
Courtesy of freedigitalphotos.net
Jeremy over at Modest Money started a new job last year at a structured settlements firm, and I have to be honest, I had no idea what that was about. But don’t worry, I have checked it out for you!
If you are the victim of an injury, or have filed a tort claim against a company, instead of receiving a lump sum from said company, you can agree to a structured settlement, where you would receive an annuity for a set number of years.
Now, without seeing the numbers, I would say that having $1 today is better than hopefully having $2 tomorrow. Here are a few reasons why.
- I can invest my money as I please.
I am no expert in investing but at least I would be free to make my own mistakes. I would probably pay debt, and save quite a bit on interest, then buy a house to live rent free and invest the rest in different assets. Having just an annuity may cover living expenses year after year but leave no room for improvement. I can turn my lump sum into passive income that may one day be greater than the annuity! - I don’t negotiate like they do
We are talking about a company that did me enough wrong to be willing to pay me yearly for the rest of my life, or many, many years. That has to be a lot of money. And they have amazing lawyers to make sure I get as little money as possible. If they try to push for an annuity, it means I am probably better off with a lump sum. - I don’t know how long I will live
What if I die tomorrow? My heirs could inherit my lump sump while I doubt my annuity would be passed on to them. Since we are talking about injuries, or birth defects from taking pills, and other kind of physical harm, I may not live until I am 90. Getting the money now is a safer bet. - I don’t know how long the company will be around.
I get that a multi million settlement is usually peanuts for a company, but what if they go bankrupt and suddenly can’t pay my annuity? - Inflation reduces my annuity
Even with low rates of inflation, $1 today is worth about $1.02 in a year. I would rather have less today and inflation-proof my investments.
If you already have an annuity, there are options to sell your annuity for a lump sum.
You may not get such a good deal as the first time around but if you want to dispose of more cash today, it can be a good option.
Now what would I do with $1000000? Good question, I don’t think my life would change much, actually. Well, on second thoughts it would depend of the kind of wrong that company did me. I guess I would still want to live a simple life, costs may go up with medical care, but otherwise I don’t dream about fancy this and fancy that, pretty happy to be where I am!
On to the giveaway! There is $1000 to win, and it ends on January 31st, good luck to all!
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So glad we could co-host together, this is truly an awesome giveaway.
DC @ Young Adult Money recently posted..$1000 Cash Giveaway – Structured Settlement Edition
I didn’t really know what it was about either Pauline, but I enjoyed the chance to learn all about it.
Glen @ Monster Piggy Bank recently posted..Sell Structured Settlement Payments – Lump Sum vs Annuity
This is a great giveaway! I’ve learned more than I ever knew about structured settlements myself. I think I’d have to go with the money in a lump sum myself.
John S @ Frugal Rules recently posted..December Blog Goals Update
To me it would all depend on the discount rate the structured settlement company is going to pay. My guess is the discount rate is probably going to higher than I am willing to take (they are a business and they are taking on risk so I expect them to make money). If the rate were acceptable I think I would personally prefer a lump sum because I am disciplined enough to invest the money and earn a good return. That being said, I think most people would probably be better served taking the annuity payouts so they don’t blow the entire lump sum on something stupid like a Ferrari they can’t really afford.
I’m not trashing structured settlement companies at all. They found a need and are filling it (and it can be a life line for some much like a reverse mortgage). I just think most people don’t have the discipline to be responsible with a lump sum.
true, there are many examples of broke rock stars and lottery winners!
I had to learn about this topic as well. I hope I never need to think about this service, but I like that it is an option. I guess if you were disabled in a accident, it might be easier to take the lump sum to pay off your debt if you are unable to work. If I had everything in order and didn’t need the money, the payments might be the way to go.
Kim@Eyesonthedollar recently posted..Would You Take a Lump Sum for A Structured Settlement?
When I think of structured settlements, I always think of the commercials from companies that buy them. Those J.G. Wentworth commercials really get stuck in your head.
Edward Antrobus recently posted..3 Ways to Save Money When Moving
Love your comparisons!
Savvy Scot recently posted..Immune to a Recession? Companies that grew in 2012
I’d take the cash and invest it. Don’t know what changes the future might bring.
Rod J. Rogers (@FreeAgentRogers) recently posted..You’ve Given Me a Way to Change My Life
Seems to be a huge giveaway. I am seeing this wherever I go today. Good luck to everyone!
Suba recently posted..Save cost on transportation by negotiating a flex work/telecommuting arrangement
A ton of us participated in this! Geez! Thanks for co-hosting!
Holly@ClubThrifty recently posted..My Escape from Hotel Hell
I’ve learnt so much about structured settlements. Thanks for the giveaway.
Bashir Ahmed recently posted..5 Ways To Get More Work Done So You Can Buy An Island, Or Just Get Home Quicker
I am in , please count me
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You have to subscribe to the RSS feed and then use the rafflecopter widget to validate your entry, good luck!
Thanks, I subscribed and now waiting for the announcement of winner(s).
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