Looking into selling a structured settlement and need some advice

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TOPSZN
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Looking into selling a structured settlement and need some advice

Post by TOPSZN » Sun Jun 25, 2017 11:46 pm

I have a structured settlement from a wrongful death suit. It begins monthly payments in 5 years and in guaranteed for 40 yrs. at the end on the guaranteed payments ( I will be 70 yrs old) total amount paid would equally just over 4 million. Is it set up with annual compounded interest so the monthly payments in the beginning are much less than those at the end.

I have a current buyout offer of just over 1 million.

I am thinking of selling it to begin a business (buying properties and renting them out and also flipping and selling). I also want to start serious investing and get a pretty diverse portfolio.

I am 25, married with a 2 yr old and another on the way.

I am a job that pays me enough for now. I don't plan on it being my long term career.

I have a mortgage and 2 car payments (All within my current means). No other debt or loans.

I would not sell to have the money be spent erratically or make large purchases.

I would also make sure a plan is set in place on how to use the money before I made the transaction to sell.

Is it a stupid idea to sell? Or is it a good idea to take the 1 million now with the goal of making it worth far more that 4 million?

Thanks for all the feedback!

Uniballer
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Re: Looking into selling a structured settlement and need some advice

Post by Uniballer » Mon Jun 26, 2017 6:06 am

I guess to analyze this we would need to know how much the initial payments would be, and at what rate they grow?

If you could have secure income without working are you sure you want to spend a lot of time and energy playing landlord and/or house flipper? I mean, if that is your dream job, then OK (my neighbor who farms says that if he won millions in the lottery he would quit his off-farm job and, "just farm until it is all gone.").

Do you have any experience as a landlord, or flipping houses?

The Wizard
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Re: Looking into selling a structured settlement and need some advice

Post by The Wizard » Mon Jun 26, 2017 6:17 am

The company proposing to give you a lump sum is probably making a profit on the deal. This alone tells me it's probably not in your best interest to go through with the deal.
But yes, we need the details to verify my premise.

My default recommendation is to take the money as monthly payments and invest 100% of it in Vanguard mutual funds, with a suitable mix of stock and bond funds.
You want to be maxing out contributions to your Roth IRA and 401(k) as well.

Taking a lump sum to start any kind of business is RISKY and will likely fail under the circumstances, i.e. way more $$ than experience...
Attempted new signature...

bigred77
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Re: Looking into selling a structured settlement and need some advice

Post by bigred77 » Mon Jun 26, 2017 6:25 am

Sounds pretty easy to model. You know the amount and timing of the cashflows, you have an offer on the table which can be used as the net present value of the cashflows, all you need to calculate is the discount rate used by the potential buyer (the IRR). I'm sure if you post all the details someone here would even be willing to calculate it for you for the sake of curiosity.

It sounds to me like that IRR is going to be pretty reasonable. I'd probably prefer to have money upfront but I'm confident I would invest that money prudently over the next 45 years. My plan would probably be to take 15% or so off the top to get out of all my non mortgage debt, stay out of non mortgage debt, set aside some cash and maybe pay down my mortgage balance a bit. The rest I would invest for the long term.

TOPSZN
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Re: Looking into selling a structured settlement and need some advice

Post by TOPSZN » Mon Jun 26, 2017 9:20 am

Thanks for responses.

I do have experience in real estate and have my real estate license.

My father-in-law and grandfather-in-law are both experienced investors and if I decided to sell I would mak sure I was using their experience and not going in blind.

(Holding off on talking to them about this because they do not know specifics on the structured settlement)

The setttlement starts at $4847/month for 480 months increasing at a rate of 3% compounded annually. (The settlement is for life but guaranteed for 40 yrs)

What they are offering is a discount rate of just over 6%.

They also just gave another option; sell the first 35 years for 950k and keep the remaining 5 yrs (869k)

Gill
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Re: Looking into selling a structured settlement and need some advice

Post by Gill » Mon Jun 26, 2017 10:38 am

I think you would be nuts to sell this. As I understand it, you will begin receiving $58,164 a year at age 30 with these payments compounding at 3% annually for life. It almost sounds too good to be true. Without doing a precise calculation, at about age 55 you will be receiving about $120,000 and at about age 80 about $240,000 a year. Are you sure these are the terms?

If things don't work out with investing the million, you will have your entire life to think about and regret the security you would have had with this guaranteed annuity payment as long as you live. Don't squander this exceptional opportunity. You are set for life if you just leave it alone.

Gill

marshallv
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Re: Looking into selling a structured settlement and need some advice

Post by marshallv » Mon Jun 26, 2017 10:53 am

Quick XIRR confirms a rate of 6.6% if payments go for exactly 40 years as described and then stop. I guess they are taking on the risk by buying (and you taking it if decide to keep) that you die sometime early? Do the payments stop if you die or do they continue to a beneficiary? That could definitely add some complexity to the analysis.

Also, (maybe a dumb question as I don't know much about how these things really work) what about credit risk of the entity guarantying the payments? Is there any?

TOPSZN
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Re: Looking into selling a structured settlement and need some advice

Post by TOPSZN » Mon Jun 26, 2017 11:00 am

This is all great feedback. Thanks, everyone.

The payments continue to a beneficiary until what would be my 70th birthday if I die.

I am not sure as the credit risk. The company guaranteeing the payments is one of the largest firms in the country so I wouldn't think the risk is too large.

Katietsu
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Re: Looking into selling a structured settlement and need some advice

Post by Katietsu » Mon Jun 26, 2017 11:15 am

Duplicate
Last edited by Katietsu on Mon Jun 26, 2017 11:21 am, edited 1 time in total.

Katietsu
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Re: Looking into selling a structured settlement and need some advice

Post by Katietsu » Mon Jun 26, 2017 11:20 am

This is a very risky proposition. You have stated that you have experience in real estate. But at 25, your experience is naturally limited to the very recent past. People have gone bankrupt doing what you propose. Also, there is a tendency to be less diligent with money received as a windfall, regardless of the source. In other words, you may purchase that same house that you would consider overpriced at $200000 had you spent 3 years saving a down payment might seem like a reasonable buy with the settlement money.

I would think that the payments were set to begin at age 30 to give you time to mature before receiving the funds. I am surprised that you are allowed to sell and access the funds at 25 but I have limited exposure to structured settlements.

Whatever you do, go slow and do not "put all your eggs in one basket." Also be careful that you do not get advise from someone who might believe they could benefit from you choosing to take the buyout.

Avo
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Re: Looking into selling a structured settlement and need some advice

Post by Avo » Mon Jun 26, 2017 11:32 am

First of all, condolences on the loss that led to this settlement.
TOPSZN wrote:I am thinking of selling it to begin a business (buying properties and renting them out and also flipping and selling).
Do you have any experience doing this?

How would it go if you appeared on Shark Tank? Would the sharks back you in starting this business?
TOPSZN wrote:I also want to start serious investing and get a pretty diverse portfolio.
"Serious" investing means buying and holding total-market index funds, which give you the most diverse possible portfolio.

Sounds to me like you want to speculate, not invest.
TOPSZN wrote:Is it a stupid idea to sell? Or is it a good idea to take the 1 million now with the goal of making it worth far more that 4 million?
IMO, it is a stupid idea to sell.

Your settlement gives you a return of 6.6% for 40 years with essentially zero risk. You will be very hard pressed to do better on your own.

Yes, you might be a brilliant entrepreneur who can do better (though necessarily with a lot more risk). But I'd like to see some evidence of this first.

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Pajamas
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Re: Looking into selling a structured settlement and need some advice

Post by Pajamas » Mon Jun 26, 2017 11:36 am

If the ability to start your planned business ventures depends on selling your structured settlement, then that makes them very suspect even without the added negative of giving up a guaranteed life income with 3% annual increases to pursue them. If you sell the future stream of income, you would also have to earn back the buyer's profit, enough to cover the value of your own time involved in earning income, and the cost of life insurance for forty years just to break even. Edit: Plus taxes, according to a poster below.

You could keep the guaranteed future cashflow and the financial freedom that it would provide and still have your time and energy available for entrepreneurship. It really seems to me that doing something is worse than doing nothing in this instance. There is a reason you received a settlement structured in this way. Don't risk it unnecessarily.
Last edited by Pajamas on Mon Jun 26, 2017 12:08 pm, edited 1 time in total.

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jimb_fromATL
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Re: Looking into selling a structured settlement and need some advice

Post by jimb_fromATL » Mon Jun 26, 2017 12:02 pm

TOPSZN wrote:
Is it a stupid idea to sell? Or is it a good idea to take the 1 million now with the goal of making it worth far more that 4 million?

Thanks for all the feedback!
IMO not smart to sell, and a very unrealistic goal to expect to invest to make it worth more than 4 million.

Taxes are a big reason. A Google search shows that the settlement money is tax-free:
  • "...According to the IRS, any lawsuit settlement proceeds that a court awards for physical illness or injury are non-taxable. This includes wrongful death settlements, since the damages are imposed due to a court's finding that a third party is responsible for the physical illness or injury that resulted in death..."

It's complicated by the 3% per year increase, but with some quick calculations assuming only 25% federal and 6% state tax, it appears you would need a constant guaranteed return on your investment of something over 7% in order to have the same result after tax that you'll be getting from the settlement.

There are no CDs, bonds, or other guaranteed investments that come anywhere close, and you'd probably need a working crystal ball and a lot of luck to do that in the stock market.

On the other hand, you can afford to take a little more risk with your regular income and probably won't need as much cash in savings for emergencies, since you'll have some income whether you have a job or are able to work or not. Bear in mind that you still need to invest the usual suggested percentages of 15% to 20% or more of your income for retirement, because the settlement income will stop and you'll be on your own then.


jimb

BigLaw Survivor
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Re: Looking into selling a structured settlement and need some advice

Post by BigLaw Survivor » Mon Jun 26, 2017 12:30 pm

As a retired BigLaw lawyer who worked on structured settlements, I can tell you right now that selling your structured settlement to someone in the business of buying them is always a better deal for the buyer than the seller. I would not take the bait.

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TomatoTomahto
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Re: Looking into selling a structured settlement and need some advice

Post by TomatoTomahto » Mon Jun 26, 2017 12:32 pm

I'm taking the buy side on this, and I'll outbid the company by 5%. I just happen to have my checkbook handy :D

Moderators, I'm just kidding, and not soliciting a transaction. OP, more seriously, that's not a good deal for you, and it's a bad deal by more than the 5% bump I'm offering.

Liberty1100
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Re: Looking into selling a structured settlement and need some advice

Post by Liberty1100 » Mon Jun 26, 2017 12:54 pm

Take a look at the tax implications. These payments will forever (until taxes change) be tax free from state, federal and income taxes (from what I just googled, check a CPA on that). I would take that to the bank and don't sell. If you did sell and that $1million because invested, all of those earnings are taxable, or worse, it becomes only $100k. Don't do it!

Now that you have those payments no matter what, you can be a little more risky with your investments or other cash if you would like. Maybe move around other budgets to get you the cash you want. Maybe you can adjust your 401k or retirement savings to a lower amount.

CWhea1775
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Re: Looking into selling a structured settlement and need some advice

Post by CWhea1775 » Mon Jun 26, 2017 1:06 pm

Lots of good advice already, but how about this for a young person that obviously wants a challenge and is facing a big, life changing decision. For now keep your job and the settlement. Live on your current employment income for a few years. Take the settlement money you get the first year and use it to invest in real estate. See how you make out and how you like it. Repeat again for another year or two, maybe branching out to investing the settlement income and seeing how interesting that is for you. After you have tried this for a few cycles, then re-consider selling for a lump sum. I believe your settlement will be "marketable" as long as it is producing income (but check!). And I'm sorry for your loss.

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steadyeddy
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Re: Looking into selling a structured settlement and need some advice

Post by steadyeddy » Mon Jun 26, 2017 1:39 pm

Here is what I would do. I would keep the structured settlement and live off of it. That's my GUARANTEED cash flow that I can use to eat for the rest of my life.

Next, I would work hard in my day job and save money. I don't need that salary to eat, so I can invest all that "extra" money to buy real estate. Even if the real estate flops, I'll be just fine. I have guaranteed monthly cash flow.

I think you're feeling itchy to sell because you're not getting monthly payments yet. It's very hard to wait for that big pile of money, but once that money starts rolling in, you'll never dream of selling ever again.

Let me put it another way. If you DO NOT sell, you will never regret it. Your 35, 45, 55, 65, 75, 85 year-old self will be extremely thankful that you have that guaranteed cash-flow every single month of your entire life. Your monthly income at age 85 will be about $21,000/mo...guaranteed.

If you decide not to sell now, you can still sell in the future if you want. Moreover, you are almost guaranteed to get a better offer then than you have right now since the term will be shorter. But like I said before, once the money starts rolling in, you'll never bother with selling.

Lastly, the offer you have now objectively stinks. That discount rate is atrocious for a settlement with a guaranteed payout term. If you think you can get a GUARANTEED 6.6% return in real estate, BEWARE.

Wagnerjb
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Re: Looking into selling a structured settlement and need some advice

Post by Wagnerjb » Mon Jun 26, 2017 1:59 pm

steadyeddy wrote:Here is what I would do. I would keep the structured settlement and live off of it. That's my GUARANTEED cash flow that I can use to eat for the rest of my life.

Next, I would work hard in my day job and save money. I don't need that salary to eat, so I can invest all that "extra" money to buy real estate. Even if the real estate flops, I'll be just fine. I have guaranteed monthly cash flow.

I think you're feeling itchy to sell because you're not getting monthly payments yet. It's very hard to wait for that big pile of money, but once that money starts rolling in, you'll never dream of selling ever again.

Let me put it another way. If you DO NOT sell, you will never regret it. Your 35, 45, 55, 65, 75, 85 year-old self will be extremely thankful that you have that guaranteed cash-flow every single month of your entire life. Your monthly income at age 85 will be about $21,000/mo...guaranteed.

If you decide not to sell now, you can still sell in the future if you want. Moreover, you are almost guaranteed to get a better offer then than you have right now since the term will be shorter. But like I said before, once the money starts rolling in, you'll never bother with selling.

Lastly, the offer you have now objectively stinks. That discount rate is atrocious for a settlement with a guaranteed payout term. If you think you can get a GUARANTEED 6.6% return in real estate, BEWARE.
This is excellent advice.
Andy

Gill
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Re: Looking into selling a structured settlement and need some advice

Post by Gill » Mon Jun 26, 2017 2:45 pm

As for the taxation of the monthly payments, I'm not so sure it is all tax free. The award for damages is tax free, but in a structured settlement there is an interest component that is taxable. Nevertheless, I am strongly in the camp of advising to live with the settlement payments the rest of your life and I guarantee you will be very glad you did.
Gill

TOPSZN
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Re: Looking into selling a structured settlement and need some advice

Post by TOPSZN » Mon Jun 26, 2017 2:54 pm

Thanks everyone for taking the time to respond. Most everything validated what I was already thinking.

All parts of the structured settlement are tax-free, including the sale of it.

Just as an update, they did update their offer to 1,120,000.

sandramjet
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Re: Looking into selling a structured settlement and need some advice

Post by sandramjet » Mon Jun 26, 2017 2:58 pm

TOPSZN wrote:Just as an update, they did update their offer to 1,120,000.
I think the fact that they are updating their offer is further evidence this is not a good deal for you. They are simply trying to get it for the lowest cost from you, and maximize profit for them...

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Re: Looking into selling a structured settlement and need some advice

Post by jimb_fromATL » Mon Jun 26, 2017 3:49 pm

TOPSZN wrote:Thanks everyone for taking the time to respond. Most everything validated what I was already thinking.

All parts of the structured settlement are tax-free, including the sale of it.

Just as an update, they did update their offer to 1,120,000.
Since the settlement money is all tax free to you, I don't see how any investor can possibly offer you enough for you to sell it. There is nowhere you can possibly invest anything they can afford to offer where you can guarantee to earn anywhere near enough to clear the same amount after taxes.

Plus, you'll be getting the settlement money regardless of whether you're able to work or even able to spend the time chasing investments or real estate.

Just keep the settlement and gamble with any extra income you have to spare -- after you've maxed your tax-advantaged retirement accounts like 401(k), IRA, etc.

jimb

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Re: Looking into selling a structured settlement and need some advice

Post by Grt2bOutdoors » Mon Jun 26, 2017 4:07 pm

Gill wrote:I think you would be nuts to sell this. As I understand it, you will begin receiving $58,164 a year at age 30 with these payments compounding at 3% annually for life. It almost sounds too good to be true. Without doing a precise calculation, at about age 55 you will be receiving about $120,000 and at about age 80 about $240,000 a year. Are you sure these are the terms?

If things don't work out with investing the million, you will have your entire life to think about and regret the security you would have had with this guaranteed annuity payment as long as you live. Don't squander this exceptional opportunity. You are set for life if you just leave it alone.

Gill
+1000, did not bother reading rest of responses, you ARE nuts to sell this for 25 percent of nominal value. I would not sell it, I would keep it!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Raymond
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Re: Looking into selling a structured settlement and need some advice

Post by Raymond » Mon Jun 26, 2017 4:36 pm

TOPSZN wrote:Just as an update, they did update their offer to 1,120,000.
Wow, they must think you are really desperate for cash.

Unfortunately, I'm sure they get enough takers for their offers to make it worthwhile (for them.)

May I ask how these people came to contact you with their insanely generous :P offers?
"Ritter, Tod und Teufel"

skjoldur
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Re: Looking into selling a structured settlement and need some advice

Post by skjoldur » Mon Jun 26, 2017 4:42 pm

You are getting some excellent advice here.

I'll add to the business side. The best position to be in for taking the risks required to build a business is to have a secure income.

It is totally possible to bootstrap a business from a small investment if you can invest your time, effort and intelligence. If you are free from the worry of earning an income to put a roof over your head and food on the table, you are on a whole different playing field compared to most entrepreneurs. It is an unbelievably huge advantage.

You would like this money to be freely available to start your real estate empire. But I think that's the wrong way to think about it. This money will free you to build a real-estate empire. Really, it will.

Think of this way. Before the settlement you needed (wanted) two big chunks of money, one to live on for the rest of your life, and one to use to build your business. You just solved the first of these problems entirely (and maybe with some left over). Now you can use all of the money you earn in your life to tackle the second problem. You are way ahead.

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Re: Looking into selling a structured settlement and need some advice

Post by Grt2bOutdoors » Mon Jun 26, 2017 4:52 pm

TOPSZN wrote:Thanks everyone for taking the time to respond. Most everything validated what I was already thinking.

All parts of the structured settlement are tax-free, including the sale of it.

Just as an update, they did update their offer to 1,120,000.
Still, NOT enough! It shows how desperate they are to snatch this PRIZE from you. PASS on it, you take that offer and you will regret it for the rest of your life.

Best advice - disconnect your phone, stop talking to these stooges and anyone else who tries to buy the Wonka Golden Ticket from you.
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bigred77
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Re: Looking into selling a structured settlement and need some advice

Post by bigred77 » Mon Jun 26, 2017 5:57 pm

I guess just to be a dissenting opinion, I don't think the upfront offer is unreasonable.

You are still facing credit risk of the entity making the payments staying solvent for maybe 70+ years and you are facing inflation risk for 70+ years hoping it stays close to 3% or so.

Also if you keep the settlement that asset expires at the end of 40 years of payments or your death, whatever occurs last. If you take the money now, invest it, and then live off withdrawals you have more control over legacy concerns and you might be able to leave a larger lump sum to the next generation.

If you have 1.12M and you invest it for 10,15,20 years or so without making withdrawals, you would likely be in position to take real withdrawals higher than the structured settlement would offer at rates that are very conservative (3% or so) leaving you very likely to be able to maintain purchasing power with your annual withdrawals and still leaving many millions behind via your estate.

Now being 25 and hearing you want to buy rental real estate and start a business, I would advise just keeping the settlement and use the payments when they start to fund those ventures. That's just my opinion based on the risk profile of the options you stated.

BanditKing
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Re: Looking into selling a structured settlement and need some advice

Post by BanditKing » Mon Jun 26, 2017 6:20 pm

Don't sell. In fact, when the payments start coming, immediately save it or pay down debt - put it in 529s for the kids or pay off the house or cars, or whatever else. You and your family have a wonderful baseline for life, don't blow it away to spend 25% of its value on something that is currently at a premium to purchase (houses).

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Re: Looking into selling a structured settlement and need some advice

Post by Luke Duke » Tue Jun 27, 2017 9:54 am

I wouldn't sell. If you save all of the money and keep your expenses low, you will probably be able to retire in your early 40s.

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Re: Looking into selling a structured settlement and need some advice

Post by Doug E. Dee » Tue Jun 27, 2017 10:30 am

A kid down the street from me sold his structured settlement once he turned 18 because he needed drug money. What a mess.

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Re: Looking into selling a structured settlement and need some advice

Post by Tanelorn » Tue Jun 27, 2017 5:30 pm

bigred77 wrote:I guess just to be a dissenting opinion, I don't think the upfront offer is unreasonable.

You are still facing credit risk of the entity making the payments staying solvent for maybe 70+ years and you are facing inflation risk for 70+ years hoping it stays close to 3% or so.

Also if you keep the settlement that asset expires at the end of 40 years of payments or your death, whatever occurs last. If you take the money now, invest it, and then live off withdrawals you have more control over legacy concerns and you might be able to leave a larger lump sum to the next generation.

If you have 1.12M and you invest it for 10,15,20 years or so without making withdrawals, you would likely be in position to take real withdrawals higher than the structured settlement would offer at rates that are very conservative (3% or so) leaving you very likely to be able to maintain purchasing power with your annual withdrawals and still leaving many millions behind via your estate.

Now being 25 and hearing you want to buy rental real estate and start a business, I would advise just keeping the settlement and use the payments when they start to fund those ventures. That's just my opinion based on the risk profile of the options you stated.
I wanted to echo some of the good points bigred77 makes above. Let's say big company like Enrman or Lehcon some such offers you a 40 year 5-6% annuity with a 3% inflation adjustment. Would you bet 100% of you net worth on that? A lot can happen 40 years, both in terms of the issuer going bankrupt or inflation returning to 1970s levels when it would be worth a lot less than you might think.

If you can negotiate a slightly better IRR from them (yes, I know the buyers of these are usually sharks looking for desperate marks), maybe it would be worth selling half of it. Then at least you've got some cash to invest if something bad happens down the road to the annuity.

Gill
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Re: Looking into selling a structured settlement and need some advice

Post by Gill » Tue Jun 27, 2017 5:57 pm

I believe the oblgors on these arrangements is normally an insurance company, not likely to default.
Gill

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Pajamas
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Re: Looking into selling a structured settlement and need some advice

Post by Pajamas » Tue Jun 27, 2017 6:00 pm

Gill wrote:I believe the oblgors on these arrangements is normally an insurance company, not likely to default.
Gill
Insurance companies go into default on a regular basis, even ones with billions of dollars in assets. It's still probably safer than taking an immediate payout and doing almost anything with it besides putting it in fixed-return accounts where the principal is not at risk.
Last edited by Pajamas on Tue Jun 27, 2017 6:02 pm, edited 1 time in total.

Tracyfaa
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Re: Looking into selling a structured settlement and need some advice

Post by Tracyfaa » Tue Jun 27, 2017 6:01 pm

Wagnerjb wrote:
steadyeddy wrote:Here is what I would do. I would keep the structured settlement and live off of it. That's my GUARANTEED cash flow that I can use to eat for the rest of my life.

Next, I would work hard in my day job and save money. I don't need that salary to eat, so I can invest all that "extra" money to buy real estate. Even if the real estate flops, I'll be just fine. I have guaranteed monthly cash flow.

I think you're feeling itchy to sell because you're not getting monthly payments yet. It's very hard to wait for that big pile of money, but once that money starts rolling in, you'll never dream of selling ever again.

Let me put it another way. If you DO NOT sell, you will never regret it. Your 35, 45, 55, 65, 75, 85 year-old self will be extremely thankful that you have that guaranteed cash-flow every single month of your entire life. Your monthly income at age 85 will be about $21,000/mo...guaranteed.

If you decide not to sell now, you can still sell in the future if you want. Moreover, you are almost guaranteed to get a better offer then than you have right now since the term will be shorter. But like I said before, once the money starts rolling in, you'll never bother with selling.

Lastly, the offer you have now objectively stinks. That discount rate is atrocious for a settlement with a guaranteed payout term. If you think you can get a GUARANTEED 6.6% return in real estate, BEWARE.
This is excellent advice.
+1 and then some! The buyer is committing highway robbery! Definitely NOT a good decision to sell.

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Re: Looking into selling a structured settlement and need some advice

Post by Gill » Tue Jun 27, 2017 6:25 pm

Pajamas wrote:
Gill wrote:I believe the oblgors on these arrangements is normally an insurance company, not likely to default.
Gill
Insurance companies go into default on a regular basis, even ones with billions of dollars in assets. It's still probably safer than taking an immediate payout and doing almost anything with it besides putting it in fixed-return accounts where the principal is not at risk.
Come on Pajamas, you know that's not accurate. Could you cite a few examples of billion dollar insurance companies have failed and policyholders suffered as a result?
Gill

Tanelorn
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Re: Looking into selling a structured settlement and need some advice

Post by Tanelorn » Tue Jun 27, 2017 6:46 pm

Gill wrote:Could you cite a few examples of billion dollar insurance companies have failed and policyholders suffered as a result?
I don't know how big they were, but here are several insurance company defaults where investors in the company's "guaranteed" investment products got about $0.70 on their dollar.

https://www.soa.org/library/proceedings ... n161pd.pdf

Insurance policy holders, as opposed to general creditors like these investors, often got special treatment due to state guarantee pools or favorable changes in bankruptcy law. So the policy holders did fine nearly always, but that's not what investors got so that's not the outcome relevant to OP.

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Pajamas
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Re: Looking into selling a structured settlement and need some advice

Post by Pajamas » Tue Jun 27, 2017 7:01 pm

Gill wrote: Come on Pajamas, you know that's not accurate. Could you cite a few examples of billion dollar insurance companies have failed and policyholders suffered as a result?
Gill

Come on Gill, you know I didn't say anything about policyholders suffering as a result of the default. You can do your own research on that since that was your idea. 8-)

It is a fact that multibillion dollar insurance companies default regularly. It is handled on a state-by-state basis and the individual states set limits for the amount that an annuitant can recover in default. For instance, in NY it is $500k. http://www.dfs.ny.gov/consumer/cli_licgc.htm

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Re: Looking into selling a structured settlement and need some advice

Post by Gill » Tue Jun 27, 2017 7:15 pm

If you weren't talking about policyholders, I.e., creditors who are you talking about? You knew you were a little overstated with your assertion.
Gill

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Re: Looking into selling a structured settlement and need some advice

Post by Tracyfaa » Tue Jun 27, 2017 8:48 pm

ENOUGH!

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Re: Looking into selling a structured settlement and need some advice

Post by Grt2bOutdoors » Tue Jun 27, 2017 10:02 pm

Pajamas wrote:
Gill wrote:I believe the oblgors on these arrangements is normally an insurance company, not likely to default.
Gill
Insurance companies go into default on a regular basis, even ones with billions of dollars in assets. It's still probably safer than taking an immediate payout and doing almost anything with it besides putting it in fixed-return accounts where the principal is not at risk.
Provide examples other than Executive Life. Insurance companies go into default on a "regular" basis on claims paying basis, even ones with billions of dollars? Provide the proof. Insurance companies are highly regulated financial institutions that are required to keep reserves on hand to meet claim obligations.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Looking into selling a structured settlement and need some advice

Post by Nate79 » Tue Jun 27, 2017 10:52 pm

Grt2bOutdoors wrote:
Pajamas wrote:
Gill wrote:I believe the oblgors on these arrangements is normally an insurance company, not likely to default.
Gill
Insurance companies go into default on a regular basis, even ones with billions of dollars in assets. It's still probably safer than taking an immediate payout and doing almost anything with it besides putting it in fixed-return accounts where the principal is not at risk.
Provide examples other than Executive Life. Insurance companies go into default on a "regular" basis on claims paying basis, even ones with billions of dollars? Provide the proof. Insurance companies are highly regulated financial institutions that are required to keep reserves on hand to meet claim obligations.
You might find this site with a long list of bankrupt insurance companies useful.

https://www.nolhga.com/factsandfigures/ ... /date#sort

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BL
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Re: Looking into selling a structured settlement and need some advice

Post by BL » Tue Jun 27, 2017 11:56 pm

OP, as most others are saying, keep the generous payments and please don't sell them. Your future self will thank you. Folks would "die" to have an offer of increasing pension like you have. You will be enabled to do all sorts of things as long as you don't encumber your future income. Over time, you will be able to make more considered decisions, and hopefully you won't make a poor one due to lack of experience and maturity. Meanwhile work hard and maybe make use of some of your income when you have it to purchase some real estate to "get your feet wet".

I do know someone who did something like this with his military pension, I believe he already knew he had a potentially fatal disease. As it was, he sank the money into a farm and died a few years later, leaving little for wife or kids. It seemed like such a shame. He probably got some satisfaction out of his dream purchase, but not income.

Don't spread the word about your windfall as all the vultures will be out looking for you. Perhaps it is too late already, but if you get sell it, you can be sure they will be there to help you spend or "invest" your money.

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Re: Looking into selling a structured settlement and need some advice

Post by IowaFarmBoy » Wed Jun 28, 2017 5:02 am

I started a home building/remodeling/rental property business at 25, was very successful till about 30 and was bankrupt by 33 when there was a really bad market crash (18 of 19 banks in the county failed). I was growing fast and everything was tied up in real estate with no income stream beyond the business. A guaranteed income stream is invaluable as you build a business.

My recommendation would be to keep this generous income stream and slowly build up the rental properties. You have a job you can live on and the income from the settlement will provide you a lot of seed money each year for the business. This gives you a chance to learn as you go and also to see how you like this business.

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Re: Looking into selling a structured settlement and need some advice

Post by Grt2bOutdoors » Wed Jun 28, 2017 6:33 am

Nate79 wrote:
Grt2bOutdoors wrote:
Pajamas wrote:
Gill wrote:I believe the oblgors on these arrangements is normally an insurance company, not likely to default.
Gill
Insurance companies go into default on a regular basis, even ones with billions of dollars in assets. It's still probably safer than taking an immediate payout and doing almost anything with it besides putting it in fixed-return accounts where the principal is not at risk.
Provide examples other than Executive Life. Insurance companies go into default on a "regular" basis on claims paying basis, even ones with billions of dollars? Provide the proof. Insurance companies are highly regulated financial institutions that are required to keep reserves on hand to meet claim obligations.
You might find this site with a long list of bankrupt insurance companies useful.

https://www.nolhga.com/factsandfigures/ ... /date#sort
Bankrupt perhaps but where the policyholder lost? Far and few, very few indeed. Otherwise no one would have confidence in purchasing all sorts of insurance policies, failure to pay valid claims? Just does not happen.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Looking into selling a structured settlement and need some advice

Post by jimb_fromATL » Wed Jun 28, 2017 6:57 am

Grt2bOutdoors wrote:
Nate79 wrote:
Grt2bOutdoors wrote:
Pajamas wrote:
Gill wrote:I believe the oblgors on these arrangements is normally an insurance company, not likely to default.
Gill
Insurance companies go into default on a regular basis, even ones with billions of dollars in assets. It's still probably safer than taking an immediate payout and doing almost anything with it besides putting it in fixed-return accounts where the principal is not at risk.
Provide examples other than Executive Life. Insurance companies go into default on a "regular" basis on claims paying basis, even ones with billions of dollars? Provide the proof. Insurance companies are highly regulated financial institutions that are required to keep reserves on hand to meet claim obligations.
You might find this site with a long list of bankrupt insurance companies useful.

https://www.nolhga.com/factsandfigures/ ... /date#sort
Bankrupt perhaps but where the policyholder lost? Far and few, very few indeed. Otherwise no one would have confidence in purchasing all sorts of insurance policies, failure to pay valid claims? Just does not happen.
Yep. The entire insurance industry depends on consumer confidence that the insurance will be paid.

The companies that buy structured settlements are certainly aware of the risks -- and aware of the stability and ratings of the insurance companies responsible for the payments. Just like any other investor, the more the risk the higher the rate of return they want for their investment.

Yet this company is willing to pay over $1.1 million up front for this annuity, which appears to be equivalent to about 6% - 7% return on their money, instead of the 10% to 20% or more I've seen documented for some kinds of settlements from shaky sources.

I doubt that any astute investment company or individual would be willing to risk a million+ up front betting on the OP being able to bring in $4 million over the next 40 years by investing in real estate. So it's not a good bet for the OP either.

jimb

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Re: Looking into selling a structured settlement and need some advice

Post by LarryAllen » Wed Jun 28, 2017 7:18 am

I wouldn't sell for a few reasons:
1) it seems the "cost" of the buyout is too great;
2) a 25 year old, no matter how smart you think you are, is bad;
3) it's a bad time to buy real estate;

I am sure I could come up with more. My advice is you forget about that money for a while, work hard, and in 10-15 years you'll have a nice nest egg building up. Whatever you do I would advise not to touch that money for a good long while. Live within the means of your job income. You'll thank me later!

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Re: Looking into selling a structured settlement and need some advice

Post by Grt2bOutdoors » Wed Jun 28, 2017 8:05 am

LarryAllen wrote:I wouldn't sell for a few reasons:
1) it seems the "cost" of the buyout is too great;
2) a 25 year old, no matter how smart you think you are, is bad;
3) it's a bad time to buy real estate;

I am sure I could come up with more. My advice is you forget about that money for a while, work hard, and in 10-15 years you'll have a nice nest egg building up. Whatever you do I would advise not to touch that money for a good long while. Live within the means of your job income. You'll thank me later!
A better idea - placed the structured settlement into an irrevocable trust to keep you from committing "financial suicide" by making quick and rash decisions. If it were so easy to make money in real estate, everyone would be doing it. The last time everyone was doing it? it did not end well. Amongst the various individual victims, here is a list of the corporate collateral damage - Bear Stearns, Lehman Brothers, Washington Mutual, Wachovia Bank, Countrywide Mortgage, Merrill Lynch, National City Bank, Downey Financial, Ambac, Fannie Mae (in past form), Freddie Mac (in past form); the latter two are now under the conservatorship of the United States Treasury.

If you really think you are that good, work a job and save - then using your own capital, prepare a business plan and go door to door seeking external financing to fund your real estate business - watch how difficult or easy it is to obtain financing. And I wish you good luck, really, I do, the grass always looks greener from the other side, it's only when you get there you find that the grass has a "weed" problem. You'd probably make more money buying a REIT without the associated headaches.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Looking into selling a structured settlement and need some advice

Post by Tanelorn » Wed Jun 28, 2017 11:04 am

Grt2bOutdoors wrote:Bankrupt perhaps but where the policyholder lost? Far and few, very few indeed. Otherwise no one would have confidence in purchasing all sorts of insurance policies, failure to pay valid claims? Just does not happen.
Do you think OP, who may have won a legal settlement from an insurance company, is a "policy holder"? It seems to me he is probably an unsecured creditor, in line in event of a default or impairment behind both the policy holders and the secured bondholders. Sure insurance companies have nice credit ratings for their policy holders, but maybe it's worth checking what S&P has to say about said company's very long term unsecured debt? That would give a better idea of the credit risk involved.

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Re: Looking into selling a structured settlement and need some advice

Post by JDCarpenter » Wed Jun 28, 2017 11:12 am

Tanelorn wrote:...
Do you think OP, who may have won a legal settlement from[a tortfeasor who paid the settlement via purchasing an annuity from] an insurance company, is a "policy holder"? ...
FTFY. And, in my experience, yes.
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