Today’s volatile economic environment raises questions by personal injury and workers’ comp claimants considering whether to structure their settlement. Should they place their funds in a structured annuity? Or should they take the money in a lump sum and hope to do better in the investment markets?
Enrique Sierra and I had the opportunity to prepare an article on the subject for OCTLA’s The Gavel. The article appears in the Spring 2021 issue.
Looking At The Numbers. Life insurance companies that offer structured settlement annuities use a number of underlying investment vehicles to determine the quoted annuity yield. A typical annuity portfolio is made up of investment-grade corporate bonds and government bonds. Under five percent is invested in the stock market. The result is a blended rate that is significantly higher than say long-term Treasury yields.
Because life insurance carriers are not tied to any one interest rate when establishing the yield for a structured settlement annuity, rate flexibility over the long term means higher yields. The returns become even more attractive because they are state and federally tax-free.
Factoring in the tax-free feature, the real rate of return on a structured settlement annuity is often greater than a similar quality taxable investment. This is particularly true in California where state income taxes are high.
To read the full article, click here.
For questions about structured settlements, please feel free to contact me. —Pat