Understanding Structured Annuity Settlement

You may wonder regarding the underlying mechanism which drives it? Structured annuity settlement is usually a long term contract. With this, it is very significant that the individuals involved, especially the one who will receive this, should understand several components such as payment schedule, settlements , amount per payments, policies, etc. It is also significant to possess pertinent documents like copy of annuity application and agreement. Remember that the regulatory and legal problems with settlement broker can be difficult to evaluate.

You may also wonder about the advantages of structured settlement annuity . For individuals who obtained settlement disbursements might look forward for a long-term financial security. Meaning, you have a peace of mind that even if something happens to you in the future, whether it is an accident or sudden health problems or other unpredictable circumstances, you are aware that you will receive financial assistance from the settlement . In addition, the money that you will receive from it is without tax as long as the structure of payment will stay as on what it is stated on the agreement. Understanding these advantages will surely convince you more to try this.

On the other hand, it will also be great if you understand the cons of structured annuity settlements . Even if it offers a lot of benefits, the cash value of the overall amount that will be paid will devalue. One of the reasons here is the recent recession of the economy, which can somewhat affect this according to some experts.

If you are considering getting one, it is very significant to consult a professional that will help you on your endeavor. Be sure to contact a person who truly understands this field. These individuals can be a CPA or MBA master's degree holder who can help you understand it very clearly.

The internet is also a great source for you to get more information about structured annuity settlement . There are several websites and articles over the internet that will help you familiarize this option. There are also e-books and other informational tools available online that can surely help you understand it. Just take your time when getting information over the internet and make sure that they are from a trustworthy source.

You can also visit the nearest financial institutions in your area, so that you can personally talk to one of their employees who is willing to teach you the advantages of having one. Be sure also that the financial company has a good reputation and track record so that you can assure that your future is in safe hands.

A Structured Settlement Annuity

With that in mind, let's take a look how a structured settlement annuity compares with one of the most popular investment vehicles, the equity income mutual fund.

First, let's look at who issues the annuity and the mutual fund.

A structured settlement annuity is issued by a life insurance company. An equity mutual fund is issued by and investment company that pools the assets of multiple investors in equity securities.

Next, let's look at the long term capabilities of each to provide a lifetime income.

An annuity payment plan is created up front and is a predictable and dependable source of income that can not be outlived. A mutual fund can be a high paying investment. However it can also be highly volatile and unpredictable based on market conditions and can actually lose money and stop your earnings if the fund performs poorly.

What about guaranteeing the payouts?

An annuity is guaranteed by the issuer of the annuity based on the terms of the structured settlement . A mutual fund is solely dependent on market activity and thus can not be guaranteed.

What about costs?

The annuity has no cost associated with it. A mutual fund can be subject to a number of fees, like a sales load, yearly management fee, and marketing expenses. Even the lowest cost index funds have some costs associated with them.

What about keeping up with inflation?

A structured settlement annuity can have a cost of living adjustment incorporated into the annuity at the time it is designed. An equity mutual fund can outperform inflation based on how the underlying securities perform. However it is difficult to predict what the return will be and remember "past performance is not and indicator of future results."

But what about the dreaded T-word....Taxes??

A structured settlement annuity is tax free as long as the money received is the result of personal physical injury or physical illness. As income is earned from an equity mutual fund taxes, capital gains, income etc, must be paid.

What about flexibility?

A structured settlement annuity payment amount and schedule may not be altered at any time. Conversely, money can be moved in and out of mutual funds. However, taxes, sales loads etc may be applicable with each transaction.

About the Author

Jordan is an expert in the finance market. Throughout the years he has gotten a lot of experience in the finance world and loves to share his findings with the world. He also writes on other subjects such as Antique Engagement Rings and the Best Deodorant For Men.