Individuals who receive monetary awards as the result of court proceedings are often paid in the form of annuities. A structured settlement annuity is a form of payment that is setup to protect the payee. There may be many reasons that a person receives an annuity. Monies may need to be protected because long term financial obligations exist such as medical or attorneys fees. A person may also not be able to work as the result of injuries and may need annuity payments to pay for month to month living expenses.
Not every individual will benefit equally from the more common reasons for an annuity contract, however these individuals can still use payments as monthly or quarterly investment opportunities. There are two general ways in which this can be done.
Selling an annuity to invest money yourself
In some jurisdictions, people are allowed to sell their annuity contracts to a third party. In regions where this is legal, people can get cash right now from their annuity and invest it in accounts such as a 401K or Roth IRA. The benefit here is that all the potential money from an annuity contract sale can be invested at once and begin earning dividends or interest. The drawback is that selling an annuity means taking less than the total future payout of the contact. Not all states allow for the sale of annuity contracts. If you live in a state that does permit this type of transaction, the options for individuals who need the long term payments that are provided through an annuity contract may not be available.
Invest monies as they become available
Just because your state does not allow for the sale of annuity contracts does not mean you cannot invest routine payments. Instead of taking the check every month and spending it on frivolous things, individuals can invest the money directly into accounts like the ones mentioned before. Assuming the payments are not needed for medical or other expenses, annuity payments can be invested as a lump sum can, just at a slower rate. Payments can now be transformed into a structured settlement investment.
Annuities are often received by those who have been awarded settlement payments as the result of court proceedings. Many individuals need these payments to support themselves because of injuries that do not allow them to work or to pay for ongoing medical care. For those who do not necessarily need these funds for survival, the annuity can represents an excellent opportunity for investments in interest-earning accounts, such as 401K’s or Roth IRAs.
