Choosing to sell all or part of your structured settlement or annuity payments for a lump sum now has its benefits:
- It allows you to take care of expensive bills, medical expenses, loans or credit card debt that may be causing you stress in the present moment
- It gives you the opportunity to buy a home, buy a car, pay for education, travel, or even start your own business
- It gives you the opportunity to make an investment that can double, triple, or even quadruple in the future. This is especially beneficial to younger people because investing money early can allow you to reap the benefits when you are older, allowing you to pay for education, buy a home, or support your family
- Being able to hold all of the money from your settlement at one time allows you to explore more options for your life than if you had to wait every month/year to receive the money in small amounts
- Due to changes in inflation and the value of money in the future, the payments you are expecting to receive in the future may be worth a lot less than it is today
- The transaction goes through the superior court in your state before finalizing; they make sure the sale is in your best interest and that you are getting a fair amount for your structured payments
Cons (Reasons to Keep Your Annuity)
Choosing to keep a structured settlement or annuity rather than selling some or all of it for a lump sum also has its own benefits:
- It gives you the peace of mind that you have guaranteed payments coming to you over a period of time. In case you are unable to work or be supported by friends and family, this steady income stream will allow you to cover expenses and bills on your own.
- It allows you to take advantage of the tax benefit that comes with having a lower income than if you were to collect all the money at once and have your income for the year in which you received it go up. However, studies show that these tax benefits don’t end up saving you that much if you are a senior by the time your payments stop coming in because senior citizens receive many tax exemptions already
- Having the guaranteed income in the future allows you to be able to afford new medicines and technology that will likely be discovered in the future
- When you sell your structured settlement payments, the buyer uses a discount rate to determine the value of your future payments in the present day, so the amount you receive today will be lower than the sum of your payments if you were to wait to receive them in increments
- The transaction must be approved by the superior court in your state, and they only accept it if you have a good reason to cash out the money. You must have a legitimate reason for why you need a large amount of money at once or else it won’t be approved and you will be forced to keep your annuity or structured settlement payments as is.