Because a settlement annuity is
a guaranteed source of funds
paid on a tax-free basis, it is
very difficult for an investor
to match the rate-of-return
generated by a structured
settlement. The table below
illustrates how much additional
interest an investor would have
to earn in order to match the
before tax rate of return
offered by a structure, assuming
the current tax brackets. The
table below illustrates the
before tax rate-of-return
required to match the return
offered by a structured
settlement.*
|
Structure Return Rate |
Tax
Brackets |
|
|
|
|
|
|
|
10%* |
15%* |
25%*
|
28% |
33% |
35%* |
|
4.5% |
5.00 |
5.29 |
6.00 |
6.25
|
6.27 |
6.92 |
|
5.0% |
5.55 |
5.88 |
6.67 |
6.94 |
7.64 |
7.69 |
|
5.5% |
6.11 |
6.47 |
7.33 |
7.64 |
8.21 |
8.46 |
|
6.0% |
6.67
|
7.06
|
8.00
|
8.33 |
8.96 |
9.23 |
|
6.5% |
7.78 |
7.65 |
8.67 |
9.03 |
9.70 |
100 |
* Figures would be even higher
with state and local taxes.
In order for an injured party
to earn the 6 percent return
rate of the structured
settlement, he or she would have
to earn an additional 3.23
percent on the cash investment
at the 35 percent tax bracket
(9.23 % less 6.0 %), an
additional 2.33 percent at the
28 percent bracket and 2.0
percent more in the 25 percent
income tax bracket. That’s a lot
of interest to earn and the self
investor would still have to
subtract any local and state
taxes, as well as the related
brokerage or investment fees.
|
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