Structured Settlements Annuity

by Pension Forecast

William asks…

What are structured settlements and annuities?

I keep seeing a commercial for JG Wentworth, who allows you to get all your money at once if you have a structured settlement or annuity. First, what are these things, and how do they work? Second, how much do you get to keep if you use their services? Can you give some hypothetical examples of situations?

Pension Forecast answers:

Annuities- something a person buys if they can’t handle their money when they are older.
They may drop 100K in cash into an annuity and the annuity pays them $300 a month for the rest of their life.
Cost can be as much as 15% in commission for the seller (huge profits for sellers).
And annuities can carry yearly costs of 5%.
A financially smart person will avoid annuities at all costs.

Structured settlement example.
Someone gets killed or hurt by neglicence of a company or another driver.
In the lawsuit they state that you will $10,000 a year for life.

With these settlement companies – they will give you the cash upfront.
A lump sum – with no further yearly payments.
A person can pay as much as 40% of their benefits to this settlement companies.
Again – a VERY, if not extremely profitable business to be in…

Susan asks…

when dealing with J G Wentworth or other structured settlement or annuity buyers?

what kind of percentage can I expect them to take off the top of a structured settlement or annuity? does it depend on how the loan payments are made, how much they are and how long until it’s paid? or is it a flat rate?

Pension Forecast answers:

The pricing depends on how far into the future the payments are as well as what company you are dealing with. If they advertise on tv the company tends to have higher rates to pay for those expenses. Most people think it is the interest rate but when selling annuities it refers to the discount rate. Discounting is the process of reversing the value of the future payments back to the present value of the money today. So the discount rate is the percentage taken to convert the future money into today’s dollars. When you have money locked into an annuity, that does not allow for Cost of Living Adjustments, typically your money will be worth less in the future because of inflation. So over time your buying power diminishes. When you consider the fees of many investment annuities, experts tend to discourage most people from buying them.

Remember this is not a loan. You can get in exchange for the future payments. It doesn’t get paid back and there are no credit checks. For more information regarding how the process works visit here. Http://rescuecapital.com/blogs/2011/01/how-to-sell-an-illiquid-asset/

Michael asks…

do you get all your money back at the end of a Structured Settlement Annuity?

do you get anything back at the end?

Pension Forecast answers:

When you have a structured settlement annuity you receive payments for a specific time period lets say hypothetically 20 years. After the 20 years are up, you’re done. IF you sell your future payments you get a cash lump sum now. The rate that is given is called the discount rate. If you sold all your payments for X amount of dollars then you are done when you receive your cash. However not everyone sells all of their payments. Let say you sold 10 years worth. So you get X amount of cash and your payments will resume after the 10 years or you can deferring selling your payments, get your cash now and still receive your payments for 10 years. After the 10 year are up you are done.

Laura asks…

Thinking about selling my structured settlement annuity payments for cash – are there any penalties involved?

Pension Forecast answers:

If by penalty, you mean a discount on the value of your structured settlement, then yes. The cash you will receive up front typically is worth approximately 50% of the value of your total payments – but shop around, as you may find some buyers offer much better terms than others.

There are only a few cases where it makes sense to sell your structured settlement payments – if you are very skilled with outpacing inflation through investments, have a business you want to invest in, or if you have a short life expectancy and want to simplify estate planning, to name a few.

Check below for more pros and cons to selling your structured settlement.

Charles asks…

What is the best place for buying my annuity and structured settlement?

Pension Forecast answers:

Realizing that I needed my annuity now instead of in bits and pieces over 15 years, I started shopping around for some of the companies that deal in this case. I found that getting an attorney and the companies that highly recommend doing so are the most trustworthy in a fair exchange.

I went to Future Annuities of America for my annuity but they do structured settlements and basically any other large payout thats over a period of time. They gave me the highest amount out of all the other places I went to.

Here is the site: www.futureannuities.com

They are really good and the money up front helped a lot, especially with gas prices. I would pick a place that you feel comfortable with. I liked how they pushed having an attorney and all the legal steps to take so you don’t get penalized by the government on the money.

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