A structured settlement is an arrangement where the recipient receives periodic payments over time as compensation for personal injury or other claims. These settlements provide long-term financial security and stability to the plaintiffs.
However, many people choose to sell their structured settlements due to the urgent requirement of cash. This could be due to unexpected financial emergencies, paying off debt, or investing in something like education or real estate. Additionally, some people simply prefer having all their money upfront rather than waiting years for small monthly payments. Hence, when you opt to sell your structured settlements, it’s good to get an idea of the amount you can get, also called the present value of your future periodic payments.
Structured Settlement Calculator
Our structured settlement calculator will help you determine the present value of your future payments and compare it to potential lump sum offers from buyers.
↪ How to Use Our Structured Settlement Calculator
- The first step in using our calculator is to choose your payment type.
- Then input the date and amount of your next payment.
- Next, type the number of payments remaining or the number of payments you want to sell.
- Lastly, select the payment intervals whether it’s weekly, bi-weekly, or monthly – so we can accurately calculate its present value as per today’s discount rate.
Note: Remember that while our calculator provides an estimate for informational purposes only, several factors may impact the actual sale price.
↪ What Factors Impact the Value of My Structured Settlement?
The value of a structured settlement depends on several factors:
- The amount of each payment
- The number of remaining payments
- The frequency of payments (monthly, annually, etc.)
- The discount rate applied by potential buyers
A higher discount rate will result in a lower lump sum payout when selling your future payments. It’s essential to understand this concept as it affects the final offer made by any buyer.
↪ Understanding the Discount Rate
The discount rate is essentially an interest rate that factoring companies use to determine what your future structured settlement or annuity payments are worth today. The idea behind this calculation is that money paid out in the future isn’t worth as much as money paid out now because of inflation and other factors.
To put it simply, if you were offered $1000 five years from now, would you be willing to accept that same amount today? Probably not – you’d want some additional compensation for waiting five years for your payment. That’s where the discount rate comes in.
Different factoring companies/structured settlement buyers follow their own discount rate (ranging from 9% to 20%) to quote the price when buying an individual’s annuities. This discount rate depends on the following:
- The length of time until each payment is made
- The size and frequency of each payment
- Your own creditworthiness and risk level (since there’s always a chance you won’t receive all of your scheduled payments)
All these factors are then combined with current market conditions and other financial considerations to calculate the discount rate percentage that will be subtracted from your total money to know the present worth of your future payments.
*** It’s important to keep in mind that different factoring companies may use different discount rates. Hence, it’s always a good idea to shop around and compare offers from different structured settlement buyers before making any decisions. ***
» If you receive Inflation-adjusted annuity payments or don’t understand how to use our structured settlement calculator, feel free to call us and clear all your confusion.
Our structured settlement experts will guide you through every step of selling the structured settlements. Even if you haven’t made a decision yet, feel free to share all your queries!
Who Can Benefit From Our Structured Settlement Calculator?
If you are receiving structured settlement payments, you may be wondering how much your future payments are worth in today’s dollars. A structured settlement calculator can help you determine the value of your future payments and whether selling some or all of them for a lump sum payment makes sense for your financial situation.
⇹ For Those Selling Structured Settlements
The primary audience for a structured settlement calculator is individuals who are considering selling their structured settlements to receive a lump sum payment. Selling your future payments can provide immediate cash that can be used to pay off debt, invest in education, or start a business.
A reputable buyer like Fairfield Funding will use the information provided by the calculator, along with other factors, such as current market conditions and interest rates, to make an offer on your future payments.
⇹ For Those Selling Annuity Payments
In addition to those receiving structured settlements, individuals who have annuity payments from insurance policies or retirement plans may also benefit from using a structured settlement calculator. Similar to those with structured settlements, these individuals may want to sell some or all of their annuity payments for immediate cash.
Q. How to Value a Structured Settlement?
To value a structured settlement, you need to consider the total amount of future payments, payment frequency, and discount rate. The present value is calculated by discounting each payment to its current worth using an appropriate interest rate. You can use online calculators like Fairfield Funding’s Structured Settlement Calculator for an estimate.
Q. What Percentage Do Structured Settlement Companies Take?
Structured settlement companies typically charge between 9% and 18% as fees or “discount rates.” This percentage represents the difference between the present value of your future payments and the lump sum offered to you. Factors such as competition among buyers, the size of your annuity, and the time until payments are due can impact this percentage.
Q. What Is the Downside of Structured Settlements?
Downsides of structured settlements include limited access to funds in case of emergencies or changing financial needs; potential loss in real value due to inflation; inability to invest large sums for higher returns; and risk associated with relying on insurance company solvency over long periods.
Q. Is It Better to Take a Lump Sum or Structured Settlement?
The choice depends on individual circumstances. A lump sum offers immediate access to cash for investments or expenses but may result in tax liabilities if not managed properly. Structured settlements provide steady income streams with tax advantages but limit flexibility regarding fund usage. Consult a financial advisor before making decisions based on your unique situation.