Structured vs. Lump Sum

The word finance to many people is a foreign word. It is not something they are familiar with, but that does not have to be the case. When you purchased your annuity, you had to learn a fair amount about annuities, which is understandable. Now you have a structured payment or you could change that into a lump sum, and you know the difference between the two.

You should already know an annuity is a type of investment where money is deposited in on large amount or in payments over time. The money deposited earns even more money and after a certain period of time is paid out to you in installments. These installments can be made monthly, quarterly or yearly and usually the amount you will receive has been predetermined. There are two main reason annuities are purchased.

They are purchased by an individual who is planning for their retirement years allowing them to have access to an income to supplement their Social Security and any additional retirement income they will have available. An insurance company will purchase an annuity for an individual as a part of their structured settlement, usually from a lawsuit. The idea behind this purchase is to prevent the individual from depleting their money rapidly without a thought for the future.

Instead the annuity money is kept under control and is only paid out in pre-determined installments. Should the individual decide they want the entire amount in a lump sum there is nothing the insurance company can do about it.

The lump sum is just as it sounds. A one-time payment of the entire dollar amount all at once rather than being paid over time. Many people are of the opinion a lump sum is a bad idea because it does not provide any security for the future. Individuals might spend the money more rapidly if they have the entire amount at their fingertips. Individuals without any self-control will not save or invest large sums of money will find themselves in a bad situation. The money will be gone and no money will be coming in. Most people prefer to have control over their money even if they don’t have the self-control to save or invest it.

Once you have an annuity you are pretty much at the mercy of the structured payment schedule, unless you decide to sell the annuity. If you wish to sell an annuity, you will find numerous companies and individuals specializing in the liquidation of annuities for lump sum payments. This is an ideal situation for the person who wants the money quickly and no longer wishes to receive the money in payments.

If you are an owner of an annuity, your first step is to find an annuity buyer. Once this process is done, all that is left is the process of the transaction, which will transform the annuity into one lump sum.