5 Life Changing Reasons to Sell Structured Settlements
If you were to believe the various television announcements, you'd think that every financial hiccup is the perfect time to sell your structured settlement. Need to buy presents? Sell your settlement! Want to take a trip? Sell your settlement! Unfortunately for those who fall for this line of thinking, selling an annuity or even part of an annuity for a good vacation is a waste.
Expensive trips aside, there are excellent reasons to sell your structured settlement. The criteria are generally simple - will the money actively change your life for better for a very long time? If you sell your structured settlement to buy a big television set and fancy car, you may feel your life is better, but you'll be ready to junk the television in a few years and your car is worth less over time, making it the opposite of an investment. If you're going to sell a structured settlement, it's best to truly make the most of your lump sum.
You're Buying a Home
In most areas, homes represent an investment. Of course, you'll need to time the market correctly to be sure that you're not buying during a bubble, but investing $30,000 into the down payment on a home where you plan to live for the next twenty years is a major life decision, and that down-payment can make a tremendous difference in the interest rates that you wind up paying.
In many cases, selling all or part of a structured settlement to arrange for a down payment makes perfect sense. This is especially true is having the funds available soon means locking in a very low interest rate which will make your investment pay off even more over time.
You're Paying for College
Unlike traditional investments, college is a sort of investment in yourself. There are many student loan options available, and in many cases, you would likely do better to take out government or inexpensive student loans and then pay the loans back with the proceeds or cash for structured settlement.
But before you start taking out high-interest private student loans, it may be wiser to cash out part of your structured settlement. Allowing interest to accrue for years on a high-interest loan may mean paying far more for that loan than you'd receive from your annuity.
You're Facing Financial Devastation
Unemployment or unexpected medical expenses can destroy your finances in what feels like a heartbeat. If you are at risk of losing your home, declaring bankruptcy or you are trapped in an area without available jobs due to debt, using the proceeds of your structured settlement to buy your way out of debt may enable you to free yourself from the spiraling debt and give you a fresh start somewhere new.
Unlike a home equity loan or refinance, selling a structured settlement has no risks and your home is not held as collateral. You'll be free and clear to start fresh in a new town or without any lingering debt.
There are tax advantages in some cases to cashing out structured settlements once you turn 59 and a half. Work with your financial planner to determine if retirement is a good time to sell your annuities and reinvest the proceeds in different retirement accounts to take advantage of taxes. Your estate plan may involve a sale of your structured annuities as well to provide more funds in your estate through other investments.
You're Investing Yourself
If you are an investor in your own right and you feel as though you can make more with your own money than you will receive over time with an annuity, you might do well to take a lump sum now and then invest the proceeds in your own investments - be it land, commercial developments, stocks or other commodities. You may very well make substantially more for yourself over time.