The terms annuity and structured settlement are often used interchangeably. A structured settlement is a defined payment schedule released to the recipient of a lawsuit in the kind of a single premium immediate annuity (SPIA). Understanding the time value of funds ought to clear up any confusion as to why you'd get less funds than your annuity is scheduled to pay out ought to you choose to sell your structured settlement payments. The present value of future funds is determined by the number of payments or funds flows due to be paid out in a single lump sum and the discount rate being used in the transaction. A payment of $100,000 payable in two years is definitely valued higher than that same $100,000 payment due in twenty years assuming the same discount rate is used in each instance. It is a simple idea to understand. The longer it takes for an investor to recover his or her investment, the less funds that future amount will be valued at today.
The Time Value of Funds and Structured Settlement or Annuity Transfers
Discount Rates Applied to Structured Settlement and Annuity Transfers
Somebody that is interested in cashing in an annuity ought to know the discount rate the factoring company is charging. For example (as of the date of this write-up) in case you have a $200,000 payment scheduled for January one, 2015 that you'd like to sell you'd get $89,763.55 using a 19% discount rate. Nevertheless, that same amount due on exactly the same date applying a 15% discount rate would net you $105,072.08. Variances in the discount rate can have a significant impact on what you would be given in a lump sum. In this prior illustration a 4% difference equaled $15,308.53! For that reason know what your discount rate is before you funds in your annuity and browse around for the best rate.
Use a Present Value Calculator to Check the Value of Your Annuity
You ought to utilize a gift value calculator to choose what your lump sum payment would be at varying discount rates. For annuity transfers rates are usually anywhere from 10-25% thus it is wise to look around. There's numerous companies that invest in structured settlements and annuities; nevertheless several of them charge high discount rates. Get the highest offer you can prior to cashing in. You may require to meet with an attorney and/or financial consultant prior to signing a contract to make sure you are entirely knowledgeable of the terms of the exchange.
Length of Time to Complete a Transfer
Annuity transfers take an average of two months to complete. Fundamentally the method is: seller agrees to the offer for his or her structured settlement payments, seller signs the contract, lawyer files petition for a court hearing for the transfer of structured settlement payment rights, court hearing is scheduled, court hearing occurs, and the seller is funded with a lump sum presuming the judge approves the transaction. Sure states may be faster than others but the all around method is exactly the same no matter which structured settlement factoring company you pick.
The Time Value of Funds and Structured Settlement or Annuity Transfers
Discount Rates Applied to Structured Settlement and Annuity Transfers
Somebody that is interested in cashing in an annuity ought to know the discount rate the factoring company is charging. For example (as of the date of this write-up) in case you have a $200,000 payment scheduled for January one, 2015 that you'd like to sell you'd get $89,763.55 using a 19% discount rate. Nevertheless, that same amount due on exactly the same date applying a 15% discount rate would net you $105,072.08. Variances in the discount rate can have a significant impact on what you would be given in a lump sum. In this prior illustration a 4% difference equaled $15,308.53! For that reason know what your discount rate is before you funds in your annuity and browse around for the best rate.
Use a Present Value Calculator to Check the Value of Your Annuity
You ought to utilize a gift value calculator to choose what your lump sum payment would be at varying discount rates. For annuity transfers rates are usually anywhere from 10-25% thus it is wise to look around. There's numerous companies that invest in structured settlements and annuities; nevertheless several of them charge high discount rates. Get the highest offer you can prior to cashing in. You may require to meet with an attorney and/or financial consultant prior to signing a contract to make sure you are entirely knowledgeable of the terms of the exchange.
Length of Time to Complete a Transfer
Annuity transfers take an average of two months to complete. Fundamentally the method is: seller agrees to the offer for his or her structured settlement payments, seller signs the contract, lawyer files petition for a court hearing for the transfer of structured settlement payment rights, court hearing is scheduled, court hearing occurs, and the seller is funded with a lump sum presuming the judge approves the transaction. Sure states may be faster than others but the all around method is exactly the same no matter which structured settlement factoring company you pick.
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