Have you considered selling your structured settlement?
Perhaps you’re unaware that with an annuity, lottery winnings or legal award you have the option to receive a lump sum settlement instead of waiting for the funds to come in over time.
Essentially, that means getting cash now instead of receiving payments. And there are things to consider before you make that decision.
Selling your annuity can give you instant money to make positive changes in your life. By selling a structured settlement, you could save 25 to 35% in state and federal taxes payable on its taxable interest income. And annual fees for annuities can be as high as 3%. When you take an early withdrawal (before age 59 1/2), you incur a tax liability plus a 10% penalty.
Annuities are not attractive as investment vehicles because they reach the same rate of return as other low risk alternatives only after fifteen to twenty years. So selling your annuity releases funds that you can utilize in ways that will generate more income in a shorter span of time.
Getting cash for your structured settlement allows you to have more control over your finances. It gives you the wherewithal to consider taking steps such as buying a house, paying off medical bills, traveling or starting a business. Of course, the lump sum versus annuity decision has to depend upon your individual circumstances.
While selling your annuity makes sense from a financial standpoint, it’s important to guard against the human tendency to spend too much too soon when you receive a lump sum payment of any kind. When we’re not used to having a lot of money, we may not have the management skills necessary to use it properly.
It’s been found that some 70% of lottery winners have lost all of their money in five years or less – regardless of how much they received.
