The Finn Blog

Fixed Indexed Annuities On Fire

September 24, 2018 – If you still believe that guy on the radio castigating you to hate annuities, it might be worth seeing what the top industry research association’s statistics reveal about 2018 YTD fixed indexed annuities (FIAs).

Hint: They’re HOT!

Through the first half of 2018, $32.1 billion worth of fixed indexed annuity purchases were made according to LIMRA Secure Retirement Institute. That’s up 14 percent from 2017 and its $17.6 for the quarter is an alltime high.

Compared to the $30 trillion market capitalization of the U.S. stock market, this is a drop in the bucket. But for an idea hatched just 23 years ago, fixed indexed annuities are making some important strides as people seek a reasonable blend of security and return for their money.

Besides, unlike the stock market, FIAs never lose money.

Fixed indexed annuities offer investors a simple proposition: In exchange for money today, you receive two promises:

You will never lose money; and,

You will receive guaranteed future income FOR LIFE, the value of which will be determined by the investment experience of the selected index and the timing of your withdrawal.

Admittedly, the nuances of the various life market offerings and index choices can be daunting. But millions of individuals have benefited from the peace of mind that comes with guaranteed lifetime income without fear of market downturns.

For those eligible to structure their personal physical injury settlements, including attorneys who structure their fees, Pacific Life has an Indexed-Linked Annuity Payment Adjustment Rider which can provide enhanced payouts over time depending on the direction of the S&P 500 – a nice option for those concerned about keeping up with inflation.

All in all, FIAs are worth considering for funds you simply cannot afford to lose. Because principal is protected, a down market doesn’t adversely affect your investment. When the market increases, so does your balance subject to any caps and limits imposed by the policy.

As more and more people take the time to educate themselves about the proven benefits of annuities, we expect to see this upward trend in annuity popularity increase.

Graph Up image courtesy of afe207 at FreeDigitalPhotos.net

The Sultan of Annuities

September 17, 2018 – The Los Angeles Angels have been officially eliminated from the 2018 postseason.

Drat!

The year started with such promise, too. Not only do we have a perennial MVP candidate in Mike Trout, but this year brought some new excitement when the Angels signed Japanese phenom Shohei Ohtani, a young player who is making comparisons to Babe Ruth for his ability to hit AND pitch at the highest possible level in professional baseball – a feat nobody has been able to successfully accomplish in over 100 years.

George Herman “Babe” Ruth – the Sultan of Swat – was a larger-than-life celebrity who, during his era, had no equal in terms of popularity. Idolized by kids, frustrated by opposing teams, he lived life to the fullest known almost as much for his excess on the party circuit as he was for his prowess on the baseball diamond.

Despite this tendency toward extravagance, however, Babe was not a big risk taker when it came to money. Early in his career, he was introduced to the concept of annuities by a player on an opposing team and he was an immediate convert to the concept.

In 1923, he purchased, among other annuity and life insurance products, a life annuity from Equitable Life Assurance Society (now AXA Equitable Life) for $3,300 a year. The annuity, which also contained a death benefit, gave Babe the option of receiving $1,683.66 per month for life beginning at age 65 or a lesser amount if he wished to begin drawing on it earlier.

“I may take risks in life, but I never risk my money. I use annuities and never have to worry.”

– Babe Ruth –

While many of his peers went broke during the Great Depression, Babe’s faith in the insurance industry allowed him and his family to continue living comfortably after his playing days ended. The annuities continued making payments when many stock certificates became worthless.

Whether you’re a prodigious baseball player or just someone who wants to secure your future free from worry about the direction of the stock market, you can’t go wrong if you do like the Babe when it comes to securing your future.

Or, as we’ll advise the Angels new star if he ever calls us for advice (even if we must do so through his translator): Buy annuities!

Baseball image courtesy of Nutdanai Apikhomboomwaroot at FreeDigitalPhotos.net

Football Annuities

August 25, 2018 – With college football upon us and the NFL’s 2018 season right around the corner, this is the perfect time to discuss fixed indexed annuities.

Hunh?

OK, so maybe I’m stretching a bit but as this year’s first kick-off approaches, it occurs to me there’s a perfect parallel between something that happens on the gridiron and the popular retirement income option that people spent $32.1 billion on so far in 2018 alone.

Here’s hoping my analogy helps the unconvinced better appreciate the value of indexed annuities.

First: What Is a Fixed Indexed Annuity?

An oversimplified explanation goes something like this:

A fixed indexed annuity (FIA) is an insurance product whereby an individual trades a lump sum of money today (or periodic deposits over time) in exchange for the promise of tax-deferred, guaranteed lifetime income, certain income, or a lump sum at some point in the future.

The money earns interest credits based on the direction of one or more indexes selected (S&P 500 is a common one) from a variety of strategies available depending on the risk tolerance of the individual.

The design of the FIA is such that if the market index increases, so does your account balance up to the maximum permitted by the contract.

The trade-off for having a cap on your upside potential is the floor which prevents your account from ever losing money.

The Indexed Annuity Leadership Council offers a Fixed Indexed Annuities 101 primer we recommend and think you’ll find helpful. (Be sure to watch the three-minute cartoon at the bottom of the page!)

Recapping: Put money in, never lose it, get tax-deferred, market-based growth followed by guaranteed income for life.

What’s not to like about that?

Got it. What’s This Got to Do with Football?

When football teams are winning late in the game, many defensive coordinators will go into the dreaded “prevent defense” to keep the other team from scoring a touchdown. The idea is that it’s better to let the other team gain a few yards slowly while the clock runs down than to give up a big play resulting in a touchdown. And a loss.

Theoretically, prevent defenses work great. But as any football fan can tell you, things don’t always work out the way it’s drawn up. Despite best defensive efforts, the losing team can mount a come-from-behind victory and the team that was supposed to win finds itself putting up an L in the record books.

What if the defensive coordinator could, instead, implement a “fixed indexed annuity defense” GUARANTEEING the other team couldn’t score?

A fixed indexed annuity is like a prevent defense with a 100-foot concrete wall across the end zone.

FIAs make it impossible for the market to defeat you once you’ve scored your points. Since your balance never decreases, you can never lose money once you roll funds into a FIA assuring you a retirement victory.

So just like a concrete wall can prevent a touchdown and a seal a victory for the wining team, a FIA can prevent you from losing the money you worked hard to accumulate and can make sure you end up on the winning side of your retirement dreams.

Football image courtesy of vectorolie at FreeDigitalPhotos.net

Harvesting the Bull

August 23, 2018 – As the current stock market is busy toasting itself for the longest bull run in history, at least one chief investment officer is keeping his bubbly on ice while cautioning investors about a market he believes is on a “collision course with disaster.”

Guggenheim chief investment officer Scott Minerd sounded two dire warnings over the past four months:

April 4, 2018 – “Guggenheim investment chief sees a recession and a 40% plunge in stocks ahead.”

August 15, 2018 – “‘If there were ever a moment to harvest gains . . . it is August 2018,’ warns Guggenheim’s Minerd.”

Many of us not-so-fondly remember the last 40% drop in the stock market way back in 2009. Minerd wonders aloud if investors have become lulled into a false sense of complacency since then.

Recession? 40% plunge? Who’s got the stomach for that again?

Take Two Annuities and Call Me in The Morning

Looking back over the decade since the beginning our our last financial Armageddon, one group of folks who don’t really have to worry about the direction of the market are those who bought annuities or entered into structured settlement arrangements as part of a personal injury settlement.

The safety and security of guaranteed income annuities, whether fixed or indexed to track with a market, provide a peace of mind that (no surprise) doesn’t usually accompany 40% market downturns. So, if we are at or near the top of a bull market, harvesting some of those gains now before the bears arrive, and allocating them toward something that will help meet fixed future expenses could end up being one very smart move.

This is particularly true for those at or near retirement since annuities help reduce one’s sequence-of-return risk. By choosing annuities to meet anticipated future monthly obligations (rent, house payment, car payment, utilities, insurance, etc.), the adverse impact of market losses is avoided.

S&P Without FANGs and Peaks & Valleys

A few interesting tidbits about the S&P 500:

Take out the FANG stocks (Facebook, Amazon, Netflix and Google), and the S&P 500 is essentially flat since January of 2015.

When the S&P 500 peaked at 1,561 on October 12, 2007, it never eclipsed that mark again until it hit 1,614 on May 3, 2013.

The truth is that nobody can ever accurately predict the direction of the market. And timing certainly matters. If Mr. Minerd ends up being right on his predictions, those who harvest their gains now and reallocate some toward meeting their secure income needs, will never regret their decision.

Farmer bull image courtesy of vectorolie at FreeDigitalPhotos.net

Dewayne Johnson v. Monsanto Company Tax Surprise

August 13, 2018 – The “Tax Cuts and Jobs Act” presumably did not factor into a San Francisco jury’s decision last week to award Dewayne Johnson $289.2 million in his lawsuit against Monsanto Company, et al. His case is potentially affected by it nonetheless.

In addition to $39.2 million in compensatory damages awarded to the former Benicia Unified School District groundskeeper who claimed years of exposure to the herbicide Roundup caused him to develop non-Hodgkin lymphoma, the jury tagged on $250 million in punitive damages against defendant Monsanto for failing to warn users about the dangers of their popular product.

With more than 4,000 people waiting in the wings to have their similarly-styled lawsuits heard, the implications of this verdict are far reaching. Even though an appeal is anticipated, the significance of this bellwether case cannot be understated.

Let’s assume for an unlikely moment the verdict is not appealed and no post-verdict settlement discussions occur. Despite the best intentions of the jury to properly compensate Mr. Johnson for his suffering and punish Monsanto for its maliciousness, the ultimate beneficiary of this outcome is, strangely enough, the U.S. taxpayers thanks to Congress’ recently passed legislation.

The Surprising Beneficiary: Taxpayers

Let’s start with the easy part. Any of the $39.2 million compensatory damage income flowing to the plaintiff, whether in cash or as periodic payments, is tax-free in accordance with 26 U.S. Code § 104(a)(2). Attorney fees and costs will be deducted from this amount, but the remainder belongs to the Mr. Johnson.

Assuming a 40% contingency fee (I have no idea what the retainer agreement calls for but 40% for cases which go to trial is not uncommon though it could reasonably be higher or lower), Mr. Johnson could still expect to see 60% of the gross figure, or $23.5 million, less costs and expenses which likely are significant on a case of this magnitude.

The tax code views punitive damages differently. Very expensively differently. More so today than in 2017 and earlier thanks to the 115th Congress and its passage of PL 115-97 signed into law on December 22, 2017.

That’s because, in its effort to streamline the tax code, our elected officials passed a logic-defying law which eliminates the ability to deduct attorney fees from many types of nonphysical injury lawsuits. This Monsanto case, because it is not employment or whistleblower related (lawsuits which retain their above-the-line deductibility of attorney fees in most instances), is fully taxable to the plaintiff with no ability to offset taxes owed for legal fees paid to the attorneys representing them.

That was not a typo: Plaintiffs owe taxes on the ENTIRE nonphysical injury portion of the verdict even though they never receive the portion they pay for legal representation.

In this instance, Mr. Johnson could expect to pay roughly 50%, or $125 million, if not more, in taxes for the punitive damages component of this verdict.

But the story gets more unbelievable.

Not factoring costs and expenses incurred for developing and trying the case and applying the same 40% contingency fee listed above in the compensatory phase, means Mr. Johnson can also expect to see his $250 million punitive damage verdict reduced by another 40%, or $100 million, for attorney fees.

Doing some quick math reveals $250 million less $225 million (50% for taxes PLUS 40% for attorney fees) nets him $25 million, or 10%, of the total punitive damage verdict.

That was not a typo either: The plaintiff nets a scant $1,500,000 more of the $250 million punitive damage portion of the verdict than he does the $39.2 million compensatory piece.

Does it make sense that a jury verdict of $50 million in compensatory damages and zero dollars in punitive damages would net Mr. Johnson more money than this $289.2 million combination verdict? True, such an outcome would not punish the defendant as intended but one would think a plaintiff deserves more than 10% of the verdict less expenses.

But there’s more.

Congress’ ultimate gift to the taxpayers? Lest you think the attorneys are exempt from paying taxes on their contingency fees earned (since, after all, the plaintiff already paid taxes on that sum once, right?), the attorney fee gets taxed a second time when the attorneys file their own taxes.

The irony of a “tax cut” law resulting in double taxation on sums awarded should not be lost on anyone practicing in this arena.

Nonphysical Injury Structured Settlements to The Rescue

Until or unless stakeholders successfully lobby Congress to rectify this ill-advised tax law, many nonphysical injury claims will continue to disproportionately subsidize those of us who are not even involved in the case. Our federal, state and local tax authorities will appreciate the windfalls, but this flagrant absence of common sense has no place in a judicial system striving for fairness.

Fortunately, some help exists in the form of nonphysical injury structured settlements for practitioners evaluating their post-verdict negotiation options. Nonphysical injury structured settlements don’t invalidate the nonsensical tax law but can help render some parity to an otherwise gloomy reality.

By deferring taxable dollars into the future, plaintiffs can increase the total value of their settlement and lower the percentage of the verdict they ultimately pay in taxes. This increased recovery and steady, guaranteed cash flow also have the added benefit of being a better needs-based outcome for those seeking safety and security after a long-drawn-out legal process.

Practice Pointer: While it may be tempting during post-verdict negotiations to drop the punitive damage component altogether in exchange for the more tax-friendly all-compensatory outcome, caution is urged here since this would likely be viewed as a deliberate attempt to evade taxes. Reasonable, defensible allocation of damages, along with the need for qualified, independent tax advice, is recommended.

Poor Mr. Johnson didn’t ask to get cancer and didn’t set out to be a poster child for the folly of our new tax laws. But his case offers valuable insights into the realities that await those who “win” a lawsuit only to end up on the losing end of the ultimate tax outcome.

Taxes image courtesy of Stuart Miles at FreeDigitalPhotos.net

 

Dear Congress: This is Wrong!

August 6, 2018 – When the Tax Cuts and Jobs Act, as it’s known, went into effect earlier this year, many hailed the legislation for simplifying things and saving the average taxpayer money.

Others protested the legislation disproportionately benefits the ultra-wealthy who didn’t need and weren’t asking to have their taxes reduced.

Whichever side of the debate you happen to fall on, one category of taxpayers stands out as being most unfairly and adversely impacted by this legislation:

People who hire legal counsel for nonphysical injury claims.

That’s because, whether intentional or inadvertent, Congress failed to consider one disastrous consequence of the new law:

Going forward, taxpayers can no longer deduct attorney fees they incur for many types of nonphysical injury disputes they bring against their alleged tortfeasors.

In an ironic twist worthy of a Shakespearean drama, plaintiffs who “win” their personal, nonphysical injury lawsuits ultimately find themselves on the losing end of their own litigation come tax time.

This careless, shortsighted, unwise and downright mean oversight must be corrected.

Untenable

To illustrate how unfair this law, if left unamended, can be, assume Plaintiff A successfully resolves a libel (nonphysical injury) case against Defendant B, pre-trial, for $10,000,000.00. Because the plaintiff is taxed on the ENTIRE award (including attorney fees), the full ten million dollars is considered taxable income.

In California, the tax on this settlement is approximately 49% (married filing jointly) to 50% (single taxpayer), or, roughly $5,000,000.00.

Further assume, since the case was heading to trial, a 40% contingency fee agreement was in place for legal representation – a standard arrangement given the skill required and the financial risk of trial absorbed by the law firm.

Not counting additional costs associated with developing and trying the case which need to be reimbursed and could erode the total recovery further, the plaintiff stands to net a mere 10% OR LESS of this otherwise substantial settlement.

Is it fair that a plaintiff ends up with less than $1,000,000 of a $10,000,000 settlement?

“Let me tell you how it will be,

There’s one for you, nineteen for me”

In some cases where costs are exceptionally high, it’s not inconceivable a plaintiff might end up OWING money on a case they supposedly won!

If the whole point of the litigation process is to right a perceived wrong, to attempt to make someone whole again and to achieve justice, what reasonable person can find anything just about this outcome?

Unconscionable

Remember that $4,000,000 attorney fee? Even though that sum was already considered taxable income to the plaintiff, the attorney who earns and actually receives that money will owe taxes on it as well resulting in the same money being taxed twice!

“Should five percent appear too small,

Be thankful I don’t take it all”

What about the legal fees incurred by the defense? Most likely the defense can deduct their defense costs depending on the type of lawsuit and the status of the defendant.

Add it all up and there is nothing equitable about any of this.

Taxing an individual on money that isn’t theirs and which gets taxed a second time is, at best, a gross failure of the framers of the tax laws to recognize this parity gaffe. At worst, it’s their calculated effort to discourage litigation and allow egregious, harmful behavior to continue unencumbered.

(The irony here, of course, is that plaintiffs now have greater incentive to reject otherwise reasonable settlement offers and proceed all the way through trial. Why not?)

Some exceptions and a partial solution

There are some exceptions to this inability to deduct of attorney fees from the outcome of a nonphysical injury lawsuits.

Most employment and whistleblower cases still permit an above the line deduction for attorney fees as do sexual harassment cases not covered under a nondisclosure agreement. Certain damages, if attributable to one’s business, may also be deductible. Clients are always urged to seek qualified, independent tax advice to analyze their own situation.

NOTE: Income received on account of personal, physical injuries or illness remains tax-free to the plaintiff. Since these damages are not considered income, the attorney fees associated with them are also not subject to taxation to the plaintiff.

Fortunately, much of the headache that accompanies the grievous tax pain can be mitigated by choosing a Nonphysical Injury Structured Settlement during the litigation resolution process. By arranging to have portions of the taxable settlement or verdict paid out over time, a more tax efficient outcome can usually be achieved saving the plaintiff significant sums of money along the way.

While nonphysical injury structured settlements can help ease the tax-induced misery caused by this harmful change in the law, the root of the problem remains. Clients and fair-minded advocates everywhere should voice their concerns to their elected officials lest they someday find themselves on the losing end of a winning proposition.

“Taxman” song lyrics by George Harrison

Taxes gauge image courtesy of Stuart Miles at FreeDigitalPhotos.net

Yanny or Laurel Justice

May 18, 2018 – Have you caught wind of this Yanny/Laurel thing yet?

There are few things that can cause you to question your own sanity more than being positively convinced of something that others are equally convinced is untrue.

I listen to this clip and hear Yanny. Absolutely, 100%, no doubt about it.

But according to more than 50% of the people who voted for Laurel, I’m wrong.

How can this be?

“Tomato, tomahto, potato, potahto, let’s call the whole thing off.”

– Ira Gershwin –

This isn’t some difference in regional dialect conversation we’re having. This gets to the very essence of how wildly our senses can vary when responding to the exact same stimuli.

What This Means for Our Civil and Criminal Justice Systems

Forget the unreliability of memory.

Going forward, every claims representative taking a recorded interview and every attorney deposing a witness no longer need concern themselves solely with whether that person is telling the truth. They need to account for the possibility that a person can be truthful but still contradictory.

“Who ya gonna believe? Me or your own eyes?”

 – Rufus T. Firefly –

Do we need to allow for the possibility that Yanny could commit a crime for which Laurel is convicted? Before I heard the Yanny/Laurel audio clip, I would have considered such a notion absurd.

Now, I’m not so sure.

When coupled with its white/gold, blue/black dress visual cousin, Yanny/Laurel forces us to doubt much of what we think we see and hear. We now have no choice but to accept that our senses can mislead us in ways we never imagined possible.

“What evidence would you have of my reality beyond that of your senses?”

– Jacob Marley –

For those who prefer a black/white, right/wrong world, now might be an appropriate time to take an extension course in Grey Area 101 to help with the confusion you’re experiencing. Understanding and acceptance is not likely to come easily, but it just might help prepare you for the world that isn’t all we thought it was.

PS It’s still Yanny

 

 

 

Image courtesy of Stuart Miles at FreeDgitialPhotos.net

A Cure for the CD Blues

May 2, 2018 – Stored lovingly in the back of a closet in my house rests a box filled with vinyl record albums of (mostly) rock ‘n’ roll artists whose music I listened to growing up.

From The Allman Brothers Band to The Zombies, these Long Player, or LP, discs, once turntable-revolving staples of my high school, college and early professional career existence, now lie dormant, an undignified, coffined homage to my younger self.

Compact discs, or CDs, offering digitally enhanced sound, emerged in the 1980s and became the preferred medium for most of the music-listening public for several decades, easily outlasting 8-track tapes which had a brief run.

Now that streaming services have emerged, threatening to relegate CDs to the same passé status as the LPs they themselves supplanted a generation earlier, I am reluctantly making room in the closet for my CD collection even if I have yet to publish its obituary.

Non-Musical CDs

Certificates of Deposit (aka CDs – no relation to compact discs), offer investors a haven for funds they can afford to set aside for a period of time. Generally available at any FDIC-insured bank, they usually pay interest which is around 25 to 50 percent better than what’s available in a typical savings account, depending on the term.

Today’s available 3-year CD Rate = 2.80%

Individuals seeking the highest possible return with the lowest possible risk often choose CDs when they want to “live off the interest” and preserve their capital.

Even multi-million dollar trusts often have a CD component for the security portion of the assets under management.

What’s Better Than a CD?

No, not two CDs. Multi-Year Guaranteed Annuities. If you invest in CDs and never heard of MYGAs, you’ll want to learn about them. Especially if you are within a few years of or are already in retirement.

Today’s available 5-Year MYGA Rate = 3.80%

Multi-Year Guaranteed Annuities (MYGAs) work just like longer term CDs except you’re dealing with an insurance product (regulated by the state) instead of a bank offering (regulated by the Federal Government). You simply purchase a single premium fixed deferred annuity which guarantees a fixed rate of return through the maturity date.

The best part of MYGAs is that they pay roughly 33% more (5-year MYGAs) than bank CDs (which, remember, are already 25% to 50% better than savings rates).

Bonus MYGA Advantage: Whereas CD owners receive 1099-INTs each year for interest earned (unless held within a qualified retirement account), MYGA owners can roll funds over into the next year until maturity at which point all accumulated interest not previously withdrawn (along with original principal) becomes due and payable. Optionally, contracts can then automatically renew at prevailing rates or be rolled into another MYGA.

As with CDs, you forfeit some flexibility with MYGAs in exchange for the enhanced returns (penalties for early withdrawal are the same for both CDs and MYGAs) but by staggering maturity dates, some of the opportunity cost can be mitigated.

If your desire is to stash away some cash for a few years and get the best possible return with the least possible risk, MYGAs may be right for you.

Your ability to purchase a MYGA depends upon the source of your funds since different tax rules apply and not all funds will be eligible. Other factors to consider include age, suitability, minimum deposit requirements and risk tolerance but they’re certainly worth inquiring about if safety and principal protection are key objectives.

Just Put Those Old CDs On the Shelf

Whether funded using personal injury settlement proceeds or your retirement savings, MYGAs are an excellent choice for money that you can’t risk losing and won’t need until age 59½ or later. Often paying nearly a full percentage point more interest than CDs, it’s an easy choice for the CD-oriented crowd.

Within the broad range of structured settlement and retirement income options, Multi-Year Guaranteed Annuities can play a significant role as part of one’s overall financial plan for anyone desiring to safely set aside funds with specific target maturity dates of 3 to 10 years.

Now, if you’ll excuse me, I need to end this post because I feel this sudden urge to “. . . reminisce about the days of old with that old-time rock ‘n’ roll.”

(Even if I have to stream the music)

One final word of caution: DO NOT listen to those self-interested financial planners who say they hate annuities. Pull back the curtain to understand their feigned cynicism by reading one of my earlier blog posts: Great News for Annuities. You can thank me later when you didn’t lose any money.

CD photo courtesy of Giovanni Sades at FreeDigitalPhotos.net

New Structured Settlement Video

April 11, 2018 – Courtesy of our friends at Pacific Life, we’re happy share with you today a new educational video designed to help plaintiffs answer a few very basic questions they’re likely to ask themselves when in the process of resolving their personal injury claim:

At two minutes nineteen seconds, the video is an easy watch and hits all the high notes about why this proven settlement option has remained so popular since its inception decades ago.

We appreciate when our life company business partners provide materials to help us help our clients better understand the value of the important services we provide.

Pacific Life is among the many excellent companies we proudly represent, and we are grateful to them for providing this important service to the public.

But what else would you expect from a company that has been honoring its financial commitments for 150 years? Thanks Pac Life!

Enjoy the video.

Sparring With Bears

April 6, 2018 – With today’s close of the Dow Jones Industrial Average ending the day down 572.46 points (2.34%), some market forecasters are speculating that we may, after a prolonged run up of equity values, finally be dipping our toes into bearish waters.

Of course, it’s always important to take these forecasts with a grain of salt since nobody can accurately predict the future. Markets go up. Markets go down. Rinse and repeat.

What’s helpful, though, is to remember your money’s exposure to loss when bears start jabbing:

Bear markets usually last about 15 months

During which time stocks usually decline about 32%

Clients of ours often come into large sums of money following the resolution of a personal injury lawsuit. Many have had their ability to earn a living compromised. Many face long and costly rehabilitation and care costs. Some are dealing with the death of a loved one who may have been the family’s sole breadwinner.

Whatever their circumstances, all our clients have one thing in common:

Their risk tolerance for loss is usually less than that of the typical investor.

Structured Settlement Payees Outlast Bears

Our clients who are lucky enough to structure portions of their settlements never need worry about a bear sending them to the canvas. When choosing guaranteed tax advantaged future income, it doesn’t matter what direction the market takes. This adds an unmatched level of security to their lives which makes adjusting to their new, post-settlement reality that much easier.

To help put the impact of a bear market into perspective, consider the real-life implications for someone netting $1,000,000 from a personal injury lawsuit:

As of today, the market is down 10.1% from its all-time high;

If a person’s investment experience mirrored the DJIA since then;

They would only have $899,000 today.

How would you feel if you lost $101,000 in ten weeks?

Balance and Timing

Our general advice to clients anticipating large personal injury settlement dollars is simple: Structure some, keep some, set some aside for a rainy day.

The structured settlement provides the foundation of most of our clients’ financial plans. This is the money they will live off. Their safety net. The money they can count on if everything else fails.

We tell them to keep some in reserve for immediate and anticipated short term needs.

Depending on their risk tolerance, we tell them to not worry too much and take a little bit of a risk with their money. Much will depend on their time horizon and the severity of their injuries, but most people will do well to put some of their money into the market since time usually works in their favor. Just not more than they can afford to lose.

Bulls and bears come and go but structured settlements just keep on paying. For this reason, structured settlements remain a preferred settlement alternative for guaranteed future income and give clients peace of mind.

You might even call them bear necessities?

Boxing bears courtesy of vectorolie at FreeDigitalPhotos.net