Deciding whether to choose a cash lump sum payment or an annuity payment can be a hard decision. There are advantages to both, however many people only see the advantages of choosing a lump sum payment and getting their money right now. Annuity payments have advantages too. Whether you choose to get them for the life of the annuity or you choose to get them for a while then sell the rest and get cash for structured settlement payments you cannot go wrong choosing payments over a lump sum payout.
Taxes
Any money that is invested into an annuity of any sort grows without tax until it is withdrawn from the annuity. There is no limit on the amount of money that can be placed into an annuity. There are also no terms concerning your income when it comes to getting annuity payments.
Guarantee
An annuity is a guarantee that you will have a constant stream of income for quite sometime, depending on the amount of the annuity. This constant stream of cash provides comfort for unexpected events. Once your monthly allotment runs out, you know that you will have another payment next month. With lump sum payments, once the money is depleted it is gone.
More Money
Annuity payments are paid out over time rather than all at once, but there are certain tax advantages to this. When you choose a lump sum payout you are required to pay taxes on that lump sum. When you choose to receive an annuity payment you are not paying such a large amount in taxes. The average annuity fee is approximately 3% annually, while the taxes on a lump sum payment are much much higher.
Choosing an annuity payment over a lump sum payments certainly has its benefits. You will rest assured that you will get regular payments for the life of your annuity. If you decide later down the road that annuity payments are not right for you then you can always choose to sell annuity payments for cash. This takes your lottery payments or your annuity benefits from a monthly payment into a lump sum payment up front all at once.
Selling your structured settlement payments helps with large expenses that arise. You can choose to sell all of your benefits or only some. Common reasons to sell include major purchases, debt consolidation and medical payments. Majority of lenders require anywhere from 5 to 10 percent of the sale price down for the purchase of a house. Selling only some of your payments still ensures monthly payments continue to help pay for the mortgage. On average, a working adult owes more than $3,761 to lenders. Selling your payments for cash can help remove debt so you can focus your money on more important things. Both annuities and lump sum payments have their advantages and disadvantages, so be sure to look into each option before making your decision.
