Most people dream of winning the lottery or a big lawsuit. When you win a big lottery, like the Mega Millions jackpot, you get one large check and then yearly payments for 29 years. Each payment is more than the one that preceded it by about 5%. Every year, more than 37,000 Americans get money from structured settlements. Many people sell their structured settlement to get their cash sooner than later. Of the people who choose to sell, more than 90% are happy with that decision. Other people like the security of having a guaranteed income for years to come. Deciding between lump sum and annuity is a big and difficult decision. Here are some tips to help you make that decision.
There are pros and cons to selling an annuity settlement or selling lottery payments. There are also pros and cons to receiving payments every year. That is what makes between lump sum and annuity payments so hard. A lot of this depends on your particular situation.
- Are you good at managing money? If you are really good at managing money, you may want to sell your structured payments. This is because the annual payments you get from a structured settlement or a lottery annuity does not factor in inflation. The check that you get in year one may go a lot further than the check you receive in year 10. You might do better by getting a lump sun payment.
- What is your financial situation like? When you are deciding between lump sum and annuity payments, you need to know what your actual financial situation looks like. How much debt are you in? Many people underestimate their real debt load. The average household currently has nearly $130,000 in debt, more than $15,000 of that is in credit card debt. One in five people in the United States is in what is called “debt hardship.” If that describes you, you may want a lump sum to pay off your debt. Given that the average household ends up paying more than $6,500 in interest every year, you may end up saving money in the long run.
- Is there any chance you need to file for bankruptcy? If you are in any danger of having to file for bankruptcy, deciding between lump sum and annuity payments should be almost a no-brainer. You want to avoid bankruptcy if you can. In February 2015, more than three thousand people had to file for bankruptcy every day of the month. There is no shame in filing for bankruptcy but if you can avoid it by selling a structured settlement, you should sell it.
- Do you or does anyone you love have high medical bills? This is another reason selling an annuity is a better idea than getting the annual payments. In the United States, more than 60% of all personal bankruptcies are caused by medical debt. If you know you are going to have to pay large amounts of money for medical treatments for yourself or someone you care about, selling your annuity may be the best way you can do that. Ir is one of the best reasons for selling.
- Do you want to start your own business? It costs about $30,000 to start a new business. The top reason that most new businesses fail is that they do not have access to enough working capital. If you sell your annuity for cash, you can take that lump sum payment and start that business that you have always dreamed of running. This is a great reason to sell and a great way to use the cash for your structured settlement. This is also a very good investment in your future.
The act of deciding between lump sum and annuity payments is not easy. While the vast majority of people who choose to sell structured settlement payments end up being happy with their decision, every situation is unique. You need to sit down with a trusted financial advisor and your family and research your options. You need to find the solution that is best for you and your family.