Selling a Structured Settlement - Future Value Considerations
Time can be a tremendous asset if you're investing money. It can also be a tremendous hindrance if you're on a fixed payment. Consider how much you can buy for a dollar today. How much do you think that dollar will buy in ten years? In thirty years?
When you have an annuity like a structured settlement, the future value of your money is always decreasing. If you are receiving payouts of $1,000 per month, you'll be able to buy much more with your $1,000 this month than you will be in a decade or two. For this reason, many individuals feel it is in their best interest to sell a structured settlement to get a larger lump sum value now.
Of course, when you're calculating the value of your structured settlement in today's dollars, you must keep in mind the decreasing future value of those payments. The value of your annuity is not the sum of all the payments. Instead, it is a slightly decreasing value for each month and year of the terms.
This decreasing value is why the lump sum value you'll be offered for your annuity will be less than what the structured settlement appears to be "worth". To counteract this, you always have the option to invest the lump sum you receive from your structured settlement and let the power of time work for you - compounding interest on your investment rather than whittling it away.
To help determine what your settlement might be worth, try our present value settlement calculator to get an idea.