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> Funding Retirement Needs |
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Many
employees find
themselves with
pension/retirement plans
that are inadequate and
they need additional
funds. There are clear
benefits to taking a sum
of money, such as
personal injury damage
awards, to fund a future
stream of payments that
will supplement private
and governmental
retirement plans. Unless
a person has been made a
part of an employer
sponsored retirement
plan, such as a 401K,
403B, etc., the
settlement that an
injured party is facing
may give them one of the
few opportunities they
will have to help fund
their future retirement
needs. Also, many
injured parties take
advantage of using
settlement funds to
provide payments
coinciding with
college/education plans
of their children and
grandchildren.
Structured settlements
give you these
advantages:
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Guaranteed TAX-FREE
and/or TAX-DEFERRED
income to take care of
immediate and long-term
needs. |
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Funds are protected
from mismanagement. |
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Total value of the
settlement is greater
than a lump-sum payment
because of compounding
and tax-free benefits. |
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Immediate settlement
avoids the “risk of
litigation” and long
appeals process. |
So, there are many benefits to an employee/injured party in considering deferred payments. There are also many insurance companies that are paying for many of these settlements that have active structured settlement programs that seek to take present claims dollars and reinvest them into their sister life insurance companies.
Mediators and judges often say that the best settlements result from injured parties taking less money than they hoped to receive, and defendant’s/insurers paying more money than they had planned. A settlement can be a “win-win” situation, and the use of a settlement annuity as outlined above can be one of those cases. Structured settlements can provide a larger payout for injured parties at a lower cost for defendants.
On settlement of a case, a specially tailored settlement annuity will be purchased to guarantee the future periodic payments. This special annuity will be purchased from a life insurance company specializing in settlement annuities, and rated Excellent by A.M. Best Company, the industry standard for rating insurance companies.
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Example of Deferred
Payments: |
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SETTING UP RETIREMENT AND
COLLEGE FUNDS
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Here's an example of a
structured settlement that will
provide the injured party, a 40-
year-old male, with lifetime
monthly income in addition to a
retirement fund and four years
of college tuition for his
child. All of the money from
this structured settlement is
tax free, and it is guaranteed
for life without the risk and
worry associated with investing
cash.
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| BENEFITS |
Benefits/Normal Life
Expectancy |
Benefits Guaranteed |
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Tax-Free Lifetime Monthly
Income
$1,500 per month for life,
guaranteed for 360
months
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$645,000
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$540,000 |
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Tax-Free Retirement Fund
at Ages 55, 60 and 65 |
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Guaranteed payment
of $50,000 in 15 years
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$50,000 |
$50,000 |
Guaranteed payment
of $100,000 in 20 years
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$100,000
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$100,000 |
Guaranteed payment
of $200,000 in 25 years
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$200,000 |
$200,000 |
Tax-Free College Tuition
$25,000 per year, guaranteed
for 4 years only,
beginning in 15 years
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$100,000
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$100,000 |
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| Total Benefits: |
$1,095,000 |
$990,000 |
ANNUITY: $348,561
TAX-FREE INTERNAL RATE OF RETURN
7.17%
TAXABLE EQUIVALENT YIELD 10.40%
(ASSUMED TAX RATE 31%)
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NOTE: Investors assume the risks
associated with their
investments during both stable
economic conditions and volatile
times, while structured
settlements provide guaranteed
future periodic payments, often
for life, with no ties to market
fluctuations, inflation, etc. Why
should injured parties risk
losing all or part of their
settlements that will be needed
in the future, when making the
most of a settlement with
tax-free guaranteed annuity
payments is safe and easy?
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