What are structured settlements and annuity payments, and how do most people receive them?
A structured settlement is a legal or insurance arrangement where the recipient agrees to receive periodic payments throughout their life, which is also known as an annuity payment. Often times this has tax advantages for the claimant (the government withholds 25% of lottery jackpot winnings). In most insurance payouts and annuities, recipients have several options — like receiving the money over 10 to 20 years, or over their entire lifetime — although not everyone gets a choice in the matter.
Common causes of structured settlements and annuity payments are insurance settlements, employee lawsuits, or even winning the lottery.
For example, the famous Mega Millions winners receive annuity payments. First, they receive one immediate payday, followed by 29 annuity payments. And since each payment is 5% bigger than the previous ones, winners often have to wait years to get most of their winnings.
But for those people who don’t strike gold with their lucky numbers, the average settlement payout is more than $300,000. That might seem like a lot of money, but in the form of a structured settlement spread out over decades (and don’t forget taxes of up to 32%), it often feels like a lot less. Selling an annuity settlements can help victims get their money on their terms.
Employee lawsuits have also risen 400% in the last two decades. The average employee suit typically pays around $150,000 to claimants, often in the form of an annuity settlement.
Why do people sell annuity payments?
Since not everyone has a choice in whether to receive a lump sum or annuity, many claimants are eager to get their money upfront, rather than in small amounts over decades. Others choose to sell only a portion of their annuity payments so they can get money for an emergency, like medical bills.
Despite the stereotype of lotto winners retiring on a beach in the Caribbean, half of all lottery winners continue working after their big win. Selling lottery payments for cash helps some winners get the payday they imagined getting when they bought the ticket in the first place.
And according to the latest figures, 92% of people who sell annuity payments are happy with their decision. Read this website for more information.