Annuities and structured settlements are both popular ways to secure a person’s future financial well being. Whereas annuities are like insurance, paid for through premiums, structured settlements are arranged following a successful court case. But what happens if you no longer need the safety net that these financial instruments provide and want to get hold of that locked up money now?
The good news is that structured settlement buyers like New Leaf Structured Settlements can release those funds by offering a discounted lump sum of money for structured settlements or future annuity payments.
People who are selling these future assets don’t usually do it on a whim. They usually have a specific need in mind.
From buying a house to escaping the destructive effects of inflation, here are 10 of the most common reasons for accepting cash for structured settlement payments.
Buying a House
Buying a house is a huge commitment with an equally big price tag. If your annuity or structured settlement is large enough, you may be able to afford to buy a property in its entirety.
If your lump sum isn’t going to be large enough for the property you want, you could use it as a down payment for a mortgage. The average down payment is around 10% of the purchase price but you may be able to get a deal for as low as 5% down payment with some lenders.
According to the National Institute of Realtors, the average purchase price of a house is $188,000 although prices obviously vary massively across the country.
Single Big Purchase
If you don’t have the funds available for a big purchase, your options are limited. Borrowing money attracts interest and if you don’t have a high enough credit score for the best rates – or even to borrow at all – you will struggle.
One of the biggest single purchases you might make with the proceeds from your sold annuity payments is a new car. Alternatively you could make a significant down payment on a hire purchase vehicle which will reduce later payments. Balance buying a new vehicle, which will quickly depreciate, with a second hand car, which may require more frequent maintenance.
Other big purchases might include a computer system, sports equipment, home furnishings or a home movie theater.
Starting a Business
The average cost of starting a business is $30,000 but if you are new to the business world you will probably find external investment hard to come by at first. Selling your annuity payments can be the ideal solution, enabling you to pay for business rates, machinery, professional services (lawyers, accountants, etc.), salaries, initial stock, marketing and all of the other start-up costs and initial overheads.
Not everyone has the interest, skills or confidence to start their own businesses but they are interested in making money from them. The proceeds from a structured settlement or annuity sale can be used to invest in an existing business or, more generally, in the equities market.
Other popular forms of investment include stocks, bonds, retirement funds and property. Although investing in this way is riskier than waiting for your annuity or structured settlement to pay out, the rate of return can be higher. Another advantage with investing is that you can usually roll over annuity funds into another investment account without losing its tax benefits. Speak to a financial planner before making a decision.
Legal costs, as we all know, can be steep so if you are involved in an ongoing case you may decide to sell your annuity payments to take away some of the stress. Divorce proceedings are a common reason why people sell annuities, especially when they are a shared asset and need to be liquidized. The money can also be used for child counseling, therapy and other associated costs.
Did you know that medical costs are the biggest source of bankruptcy in the United States with medical bills often larger than medical insurance payouts will cover? Big bills, such as those following a car accident, can be difficult to afford and even smaller medical bills can rack up quickly with the costs of dental care, minor surgeries and medications. As a result, selling annuity payments is a popular method of clearing medical bills.
Older people in poor health may opt to sell their annuities to fund private care. This is especially likely if they have life contingent structured settlements in place as they will know these can’t be passed down to their children. Funeral and probate costs can also be eased by selling future annuity payments.
Private debt, in particular credit card debt is a big problem for many people.
The main problem with debt is the effect of compound interest. As missed payments and interest build up, the outstanding debt snowballs and can get out of control.
A lump sum payment from an annuity or structured settlement can be one of the only ways to settle that debt and enable financial freedom once more. Paying down debt is also a good strategy for improving your credit rating. This can make you eligible for future borrowing at preferred rates.
College fees have increased considerably over the past decades and around 40 million Americans are sharing the burden of around $1.2 trillion debt. Parents often decide to cash in on future annuity payments in order to support their children through their education.
Beneficiaries of structured settlements following a workers’ compensation or personal injury suit may decide to retrain in an area where their injury does not prevent them from working. In this case, they may choose to sell their future payments to fund their courses.
Some people decide to cash in their structured settlements or annuities so they can afford to pay for a big wedding or exotic honeymoon. Others may simply opt to splash out on a round-the-world cruise or long-haul holiday.
Inflation is the difference between the increase in average salaries and the average increase in the cost of living. The result of positive inflation is that money doesn’t stretch as far.
If your annuity is fixed or performing poorly in relation to inflation, you are effectively losing money. By cashing in on your asset early, you can choose to spend the money now or invest it in higher performing accounts.
So, Should I Sell my Structured Settlement or Annuity?
Everybody’s circumstances are different so there is no simple answer to this question. If you are unsure whether selling part or all of your future payments is in your best interests, it is best to speak to a qualified financial advisor.
The good news is that any sale will have to go through the courts and a judge will only approve it if they are convinced you will not endure future hardship because of it.
If you can’t afford to wait the 45 to 60 days or more for a structured settlement or annuity sale to go through the courts, some buyers offer a structured settlement advance. New Leaf Structured Settlements can have your advance in the bank within 24 hours or sometimes even earlier.
If this is of interest to you, contact us today for a quote.