Structured Settlements vs. Lump-sum Payments In 1992, a 46-year-old Pennsylvania man was injured on the job. When his claim was settled, he had an option of taking a payment of about $96,000. Instead, having analyzed the financial implications with his attorney, he opted for a structured settlement that provides monthly payments for the rest of his life, with a 20-year guarantee. Each month, he receives a check for $600. The following table, based on this case, shows the tremendous long-term financial benefits of taking a structured settlement over a one-time award:
The benefit of taking a structured settlement comes to $48,840 over 20 years – or more than 30 percent higher than a cash settlement!* Assuming the following: 7 percent annual return, 28 percent federal income tax, 3 percent state income tax and an annual payout of $7,200. The lump-sum payment would be completely gone in 21 years, 10 months. ** Based on normal life expectancy of 28.7 years for a 50 year-old male. |