Winning the lottery or winning a settlement in a lawsuit is certainly sensational. After all, who wouldn’t want to be awarded funds, almost as if they came out of the sky? But the truth is that it isn’t nearly as glamorous as it sounds. Most often, the winners of the funds or settlement are offered annuity payments over periods of time. This can be unwelcome news to people who imagined hefty lump sums that could lead to early retirement, the paying off of debt or medical bills, or the purchase of luxury items.
Indeed, debt in America alone is a huge problem, and it would be hugely helpful for many people to have money to get themselves out of it. Over 40% of American families spend more than they earn, and in February 2015, there was a daily average of 3,422 bankruptcy filings. The fact is that a lot of times, this debt has nothing to do with people not working hard, but more to do with extenuating circumstances like medical bills. Nearly 20% of credit reports are hurt by overdue medical bills, and once your credit report is low, it’s harder to take out necessary loans to start a business or go back to school.
Receiving a settlement of some sort is not uncommon — by the end of 2013, there were 34.8 million individual deferred annuity contracts in place, exceeding the amount of $2.58 trillion. For some, getting installed payments is a good way of regulating and budgeting their extra income, but for others, choosing to get cash for an annuity was a ticket out of debt and towards hope.
In order to get ahead, certain investments must be made. But the unfortunate truth is that sometimes these investments can backfire and cause personal progress to halt. For instance, getting higher levels of education can lead to a higher income. However, according to the College Board, the average cost of tuition and fees for the 2014-2015 school year was $31,231 at private colleges.
The fact is that the way you decide to receive your lottery payouts is really up to you, and depends on your unique financial situations. Choosing to sell your structured settlement and get cash for an annuity might be the right ways to reduce your debt.