What Is the Present Value of a Structured Settlement?
Quick Answer
The present value of a structured settlement is the current worth of all future payments discounted by an appropriate interest rate. It represents the mathematical fair value what an economist would say your payment stream is worth today. Use the formula: PV = PMT [(1 - (1 + r)^-n) / r] where PMT is payment amount, r is monthly rate, and n is number of payments.
Key Statistic
Every 1% rate change = 3-5% value change
Expert Analysis
Present value is the foundation of how buyers determine what to offer you. The key variable is the discount rate (r). A lower discount rate means higher present value (more money for you). Here's a concrete example:
$2,000/month for 10 years (120 payments) = $240,000 face value. At 5% annual discount rate: PV = $188,622. At 9% annual discount rate: PV = $160,092. At 12% annual discount rate: PV = $139,808. At 15% annual discount rate: PV = $121,056.
The 'fair' discount rate depends on context. The risk-free rate (Treasury bonds) in 2026 is approximately 4.2%. Buyers add a premium above this for their costs and profit. A fair buyer premium is 3-7% above Treasury rates, putting the fair discount rate at 7-12% currently.
Our free calculator uses live Treasury rates to show you what your settlement is worth at different discount rates, so you can see exactly how much each buyer's offer compares to fair value.
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