Stop Watching Your Structured Settlement Or Annuity Payments Shrink and Make Them Grow!

Long Term payments from a structured settlement or annuity decrease in value over time. Contributing factors such as inflation eat away at the value of your money as time goes on. Your payments will remain the same while the cost of living continues to rise. The stock market may rise and fall but a loaf of bread or a gallon of milk will still cost more ten years form now.

Insurance companies generate enough interest off your annuity premiums or settlement money to more than pay for your small periodic payments. It's your money! Shouldn't you be able to use it? You can. Too many Americans receiving structured settlement payments don't realize how they can turn long term payments into a growing investment.

There are several options for investing your money, and they do not have to involve the risks of the stock market. Since the creation of structured settlements in the early 80's, thousands of people have sold their structured settlement payments for cash in one large lump sum.

Why do people sell their payments?

Some individuals sell payments to get the cash they need now for unforeseen circumstances like medical expenses, or to pay for things like a vacation home, home renovation or repair, or even college tuition. These are items that may not have been allocated for in the original structuring of the agreement.

A terrific way to grow your settlement, lottery or annuity money!

Growing the value of your money from investing is another reason for many to cash out their settlement, lottery, or annuity payments.

For example, although you may receive a "discounted amount" of the total settlement by selling your payments, you may increase the overall rate of return over time through compounded interest in secured holdings such as certificates of deposits otherwise known as CDs.

Smart and experienced investors will keep money in fixed income investments that obliterate the worries of the ups and downs of the stock market. Examples of these are rock solid certificates of deposit.

One thing to remain aware of, at all times, is your needs financially. Withdrawal from a certificated of deposit before maturity will eat up the dividends you are making on your settlement in penalty fees. You will also have to take into account the fact that rates could be lower for prolonged time periods.

Rates no matter what industry have cycles just like the stock market, however they are less volatile. These rate cycles can be effectively managed with some proper planning.

One of the most proven techniques for avoiding the impact of these ups and downs or long or short term cycles is to build a CD ladder. Building a CD ladder means you don't sacrifice your liquidity, and at the same time, you can take advantage of interest rates spread over several maturities.

You can make a CD ladder as short or as long you like. Picture an ordinary utility ladder. Each level is called a rung. You have a three rung ladder, or maybe a six rung ladder. Each rung can be used to represent a year. A five rung ladder will be five years long.

You can use a small or large lump sum from a structured settlement, lottery or annuity to invest in a CD ladder. Let's say you have 20K to invest, but you are worried that you may need some of that money in the few years. You could build a five year ladder with five rungs.

Using a five year ladder and 20K, here is how it would work. You invest 4K in each rung. You would invest 4K in a one year CD, the second rung would represent you investing 4K in a two year CD, the third rung also 4K in a three year CD, up until you have 4K in the fifth rung being a five year CD.

After a year the one-year CD occupying the first rung matures and each of the other CDs moves down a year. In other words, the five-year CD now matures in four years, and the four-year CD will only have three years left to mature.

The money from the previous one-year CD can now be withdrawn without penalty, or you can roll it over to the top rung as the next five-year rung on your ladder as it is now vacant. Every year you are able to withdraw or replace the rung that is for the longest term.

When you consistently replace the the rung farthest out, or the longest maturity, you are always reaping the benefit of getting the highest rates. The added bonus to the ladder system is you are only reinvesting a portion of your total investment from your settlement money even when rates are low. The ladder system alleviates the peaks and valleys and balances out with the previous years when you reinvest at a high rate of return.

When you are laddering your investments or CDs, remember to keep in mind your immediate, short term, and long term cash needs. Rolling over your CDs and their interest earned is a great way to watch your settlement money grow, however, it is important to make sure that you have money that is liquid when you need it. The interest you earn can easily be eaten up in penalties fro early withdrawal.

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Your ladder can be as short or as long as you like. Although a five year ladder will allow you to take advantage of the best interest rates offered, if the rates are extremely low or in a low cycle, a shorter ladder will keep your settlement money from being stuck in long term CDs as rates begin to rise.