If you have recently won a settlement or inherited a large sum of money, you know the annuity and lump sum differences. You have several payout options when getting a lot of money and you shouldn’t feel limited to simply abiding by what you’ve been told you should do. Here are a few considerations to think about.
- Why Selling a Structured Settlement Helps
This will be the first choice you have to make. Annuity and lump sum differences basically come down to this: Annuity gives you the payments over time, be it monthly or annually. Lump sum gives you the money all it once. How you decide to get the money really depends on what you want to do with it. If you don’t think that you can handle having all that money and are afraid you wouldn’t use it wisely, then you don’t have to sell your annuity payments. However, if you want to purchase a house or travel or go to college or pay off debt, then getting the money as a lump sum might benefit you a little more. If you got the amounts annually or even monthly, you would likely have to save up to do any of the above mentioned things just like you would if you were making a regular income.
- What the Annuity and Lump Sum Differences Are
Now, keep in mind that just because you have decided to sell your payments does not mean that it will not come without it’s own set of disadvantages. There is a good side and a bad side to both options. The problem with getting a lump sum is that overall, it might actually give you less money than if you got the amounts incrementally. However, you probably wouldn’t even notice because you’d never have all your money at one time getting it through annuity anyway.
Another difference is that by getting annuity, you deal only with your lawyer and their lawyer and the courts. If you decide to sell then you will be adding in a third party to the decision making process. Keep in mind, however, that they are only around until you receive your funds and then you don’t have to deal with them again.
- How to Make the Right Decision
The best thing that you can do for yourself is get a financial adviser. You could even take it one step further at hire someone to completely manage your finances for you. This way, you could sell your payments, get the lump sum and not be afraid that you are going to use it unwisely. The only catch here is that you need to listen to your money manager or adviser. Realize that you hired them for a reason and if they advise you against making a certain decision then you need to abide by what they say. They are not going to force you to make the right decisions. The money still does belong to you and you have the final say but the reason they are there is because they know how to deal with money and they even know how to make it, make you more money.
- Who Not to Listen to
It’s common for people coming into a lot of money to hire a money adviser but then spend all their time getting advise from family and friends. Unless your family and friends have as much money as you now do, they will not be able to give sound advise. Loved ones are well meaning and want to help but unless they have the experience, they might be leading you in the wrong direction.
- When You Should Make the Decision
You are probably on a time limit with the courts. Speak with your lawyer about when you need to decide how you’ll receive your payments. Keep in mind that if you do decide to sell your payments, then it might take somewhat longer to receive it because the buying company has to have a little back and forth with you and a judge in order to make sure everything is done properly and in your favor.
The bottom line here is, listen to your lawyer and your financial adviser regarding annuity and lump sum differences and you can’t go wrong.