Some injured parties may be hesitant to agree to a long-term structured settlement because of the current relatively low yields of the structure’s underlying investments. They may worry that by locking in yields of around 2.63 percent for 10, 20, 30 years or longer, they will not be able to take advantage of higher interest rates in the future.
In a recent Bloomberg.com article, MetLife Inc.’s CEO Steve Kandarian made an interesting forecast. He predicted that benchmark 10-year government Treasuries won’t reach a 4.5 “normalized” percentage yield for 11 more years. This takes into account an expected increase in short-term rates by the Fed in December. MetLife had previously projected the yield to reach 4.5 percent in only three years.
This means structured settlements, when factoring in their tax-free, compounded yields, will continue to offer competitive returns when compared to the yields of other safe and guaranteed investments for years to come. Structured settlement agreements can also build in automatic payment increases based on the inflation rate so payments can steadily rise over time.
The low interest rate environment has certainly taken its toll on those who rely on interest from savings to pay for day-to-day expenses. A structured settlement, with its tax-free status and compounding component, is designed to ensure enough money is available for an injured party now and in the future.
Read the Bloomberg article here.