Structured Settlements-What are they?
A "Structured Settlement" is an agreement between a claimant and a defendant whereby the claimant agrees to settle a lawsuit in exchange for periodic payments to be made by the defendant to the claimant over time. They are a popular method for settling personal injury, medical malpractice, and wrongful death cases. The defendant discharges its obligation by purchasing an annuity from a highly rated insurance company.
When I buy a structured settlement, what am I buying?
You are buying payment rights. You will own the right to receive the payments of the structured settlement annuity contract ("Structured Settlement"). The Structured Settlement annuity is issued by a highly rated life insurance company that guarantees the payments.
Why is a court involved?
Structured Settlement transfers are subject to state regulations which require court order approving the transfer. In addition, federal law requires court approval of Structured Settlement transfers. You not only have payments being issued by a highly rated insurance company, but a product approved by a court order process.
How do they work?
A fixed indexed annuity is fixed, which means your account is guaranteed never to go down, you will not lose your original deposit. However, instead of getting a small guaranteed rate of return like a traditional fixed annuity, your "base account" growth is determined by tracking the gains of a stock market index such as the S&P 500. As an example, if the S&P 500 goes up 8% in a year, you would get to keep a certain percentage of that gain, which is typically subject to a cap. For example, if your cap was 5% of the index you would receive a 5% credit to your base account. But conversely, if the market goes down in that year, you don't lose a dime! If the market drops, even in those nasty 20%, 30% or 50% drawdown years your principal is safe. You get to avoid all the bad years and only participate in the up years in the market index. How in the world can insurance companies give you the upside with no downside? Insurance companies park the bulk of your money safely in its cash reserves, never actually investing it in the stock market. This is how it guarantees your principal. The remainder is used to buy options on the stock market index. If the market is up, you receive your portion of the gain. If the market is down, the options expire, but you don't lose. Win, Win.
What Is a Structured Settlement?
A Structured Settlement is an annuity awarded to a plaintiff from a personal injury that is paid out to a plaintiff over a set period of time.The defendant often purchases an annuity through a highly rated insurance company based on the agreed upon structured settlement.
Two Other Types of Secondary Market Annuities
In addition to Structured Settlements there are Pre-Owned Annuities
and Lottery Prize-Based Annuities
What is a Lottery-Prize Based Annuity?
A lottery annuity is a predetermined amount of regular payments received by a lottery winner usually paid on a monthly or annual basis over a period of several years. Some lottery games in the U.S. offer lifetime annuities that are
paid out as long as the winner is alive.
When we reach retirement we need to balance our nest egg between two main factors:
We have several income now ideas we work with. Below are some examples.
Reliable Income with Structured Settlements
Balancing your nest egg
Ultimate Income Solution
The Teeter-Totter of Retirement Assets
Balanced Financial Inc.
3711 JFK Parkwy, #230
Fort Collins, CO 80525
What Is a Pre-Owned Annuity?
An annuity is a contract between an individual and an insurance company that is designed to meet both short and long-term investment goals. The individual makes a large lump-sum payment or a series of smaller payments to the insurance company. In return, the insurer agrees to
make periodic payments to the individual.
Structured Settlement FAQ's
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In the book Money: Master the game Tony Robins, a motivational speaker, provides the ultimate income solution: Fixed indexed annuities.
Quotes from pages 428-429:
You receive both a fixed rate of return and the option of a return tied to the growth of the stock market index as well as a guaranteed lifetime income feature.