Financial terms can be confusing.
There are investments, settlements, stocks, bonds, mutual funds, 401k’s, IRA’s, and many other terms are thrown around when discussing money.
Have you ever wondered what the difference is between a structured settlement and annuity?
Keep reading for more information on the difference between a structured settlement and annuity:
Annuity
An annuity is a contract that one makes with an insurance company in which they agree to make one large payment or several smaller payments in order to receive money in the future. The goal of this is to have a steady stream of income upon retirement.
Annuities are commonly a fixed amount that is paid out over time and certain annuities, such as retirement annuities, require you to be a certain age before you start receiving the money. There are three main types of annuities.
Annuities can also be used when someone wins the lottery. If the winner chooses not to take the lump-sum, they can receive annual payments of their winnings over a length of time. This option can help protect people from spending everything at one time.
Structured Settlement
A structured settlement is a legal agreement through which payments are made to someone that won or settled a lawsuit. The money is funded by the defendant in the situation.
The payments from structured settlements are tax-free. They are guaranteed by the company that issues the funds and are not dependent on any fluctuations in the market.
A big benefit of structured settlements is that they are very flexible with how you receive the money. You can delay receiving it for a number of years if you prefer as well.
Once the terms of the legal agreement are finalized, it is difficult to make any changes to the agreement moving forward. There can also be legal and administrative fees that are associated with structured settlements and can take away from how much you receive.
The Main Differences
Now that you have a better understanding of an annuity and structured settlement, we can highlight the main differences. For starters, structured settlements can be sold. For more information, click here.
Here are other differences:
- Structured settlements are a legal tool.
- There are different types of annuities.
- Annuities do not allow flexibility in the amount of money you receive for each installment.
- The money that you contribute to an annuity can be tax-deferred.
- Variable annuities include a death benefit to be paid to a beneficiary of your choice.
- Annuities can be difficult to get out of.
While both structured settlements and annuities are similar in the fact that money is being paid to you, there are large differences in how the money is paid and where it is derived from.
Contact Us Today
Reach out with any questions you have on this information and we will happily help you. Visit our website for more information on how to sell a structured settlement.
