Structured Settlement vs Lump Sum: Which Is Better?
Quick Answer
Neither is universally better it depends on your situation. Keep your structured settlement if you have steady income, no urgent debts, and value tax-free guaranteed income. Sell for a lump sum if you face medical emergencies, foreclosure, high-interest debt over 15%, or a time-sensitive investment opportunity with returns exceeding the discount rate.
Key Statistic
68% of sellers cite debt elimination as primary reason
Expert Analysis
Arguments for keeping payments: Tax-free income guaranteed for life or a set period. Protection from spending temptation. Creditor protection in many states. Steady budget planning. No market risk.
Arguments for selling: Immediate access to a large sum. Ability to eliminate high-interest debt (if your debt rate exceeds the discount rate, selling saves money). Down payment on a home. Medical procedures not covered by insurance. Starting a business. Investing at returns higher than the discount rate.
The math test: If your discount rate to sell is 10%, but you're paying 24% on credit card debt, selling and paying off the debt saves you 14% annually. Conversely, if you'd sell at 10% just to put money in a savings account earning 4%, you're losing 6% keep the payments.
Consider a partial sale as a middle ground access some cash now while preserving future income.
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