It’s not secret that the American economy has seen better days. The 76% of average citizens who live paycheck to paycheck can vouch for that. Today, 27% of Americans don’t have any savings, over 40% of households spend more than they earn, and the credit card debt balloon has been inflating rapidly with a net increase of $57.1 billion of new credit card debt last year (2014).
While the situation may seem dire, there are ways that some Americans invest and save their money that can secure their financial futures. Some people receive a structured settlement as the result of either a lawsuit or lottery earnings. These additional earnings can be used in several ways, but if you’re receiving a structured settlement, there are some things you should know and consider.
Lump Sums vs. Structured Settlements.
When someone receives a large amount of money from a lawsuit or lottery winnings, they can receive the earnings in two ways: a structured settlement or a lump sum. Both types of receipt have distinct advantages and disadvantages. A lump sum, as it sounds, is when the recipient is seeking the fastest cash advances and gets all of their earnings at once. This option is attractive since it’s comfortable to have real currency immediately as opposed to waiting for a certain amount at a certain time. There are significant tax penalties for receiving a lump sump, however, such as a 10% early withdrawal penalty in some cases.
A structured settlement is when someone receives a set amount of their total earnings at specific times (typically on a yearly basis as in the case of an annuity). There are tax advantages to structured settlements, such as income tax exemption. The downside of receiving a structured settlement is that if you need extra cash for whatever reason, you can’t immediately access that money.
Getting Cash for Your Settlement.
You can, however, get cash for your structured settlement by selling part of it or all of it. This is important because there are a number of expenses that can arise that require the fastest cash advances, such as college tuition payments, medical expenses, or the down payment on a car or home. In today’s economy, the majority of Americans (65%) prefer having cash on hand as opposed to receiving their money on a structured basis, according to a recent American International Group (AIG) survey.
The Best Options for Settlement Cash.
If you decide to sell your structured settlement and seek to receive the fastest cash advances rather than wait for periodic payments, the question is: what to do with this money? If you’re selling your settlement, chances are you already have something in mind. Some people reinvest their cash into stocks and bonds, or even in a business venture of their own in the hopes of growing this money into a larger income. Others use this cash to pay off growing credit card debt or college tuition debt. Whatever the reason, selling your structured settlement can be a good way to eliminate or reduce debt, or to generate new income in creative ways.