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EQUITY Program of the Month
Structuring Your Structured Settlement: Ringler Associates
Mark Vogel, CSSC
Here is some practical advice on things you should consider when you choose a structured settlement.
What do chickens have in common with tightrope walkers? They both want to get to the other side. Look carefully and you will notice that the person on the wire isn’t gazing down at their feet. The chin is up and the eyes are front, looking straight towards their future. Planning a settlement should be done the same way. Here are some practical thoughts to keep in mind as you navigate through the process.
After a settlement is reached, you are the one who will live with it. The claims representative, attorneys, mediators and judges will all be working on another file, another set of circumstances. To them it represents closure. And while closure is good, remember that a settlement should be a means and not an end. It’s really a beginning. It also does not need to be rocket science. Common sense will carry you a long way. Begin by identifying your needs. Distinguish between immediate and future concerns. Distinguish between needs and wants. On the top of your list, write income.
Income is financial oxygen. Cut it off and things become very unpleasant, very quickly. Many people make the mistake of spending too much money too fast. Choose to live reasonably for a long time as opposed to experiencing the “flash in the pan” syndrome. A year or two of luxury isn’t worth enduring several decades of poverty. A structured settlement will help you overcome your greatest challenge – the erosion of your money. No matter how good someone has been at managing their resources, unlimited access to money plus time equals disaster. Think about the Grand Canyon – a little wind, a little water and before you know it there’s a big hole in your finances. Don’t fall into the trap of chasing returns. They will mean little if the money isn’t there. The tax-free nature of structured settlement payments means you can have an acceptable return with low risk. It also creates a strong framework on which to build a great settlement plan.
Public enemy number two is inflation. The longer the payout period, the more critical it is to have a plan for rising costs of living. Imagine hearing someone say, “that and twenty bucks will get you a cup of coffee.” At 4% inflation, that’s about how much a latte will cost today’s 25 year olds when they retire. Structured settlement income can be designed to rise over time. Growth oriented financial instruments can be a good hedge against inflation, but fall into the category of non-guaranteed funds. Used with the guaranteed payments of a structured settlement, you can create a plan with basic guarantees and long-term protection from above average inflation.
Number three on the things to keep in mind is liquidity. We all have regular monthly expenses (for which we need income). We also have larger expenses which occur less frequently, or at times when we least expect them. Your accident may have added some items to this category. Create a fund for these larger expenses and a have a plan to replenish this account periodically. You can do this with non-guaranteed funds or by having the structured settlement provide periodic lump sums at regular intervals. Remember that for every item on your list, you have three choices:
Each choice is different and has its strengths and its weaknesses. Often the best choice is a combination of all three. Begin with income planning. You need food every day. Create enough liquidity to address the known upcoming expenses and a reasonable amount for the unknown. Watch out for inflation to the degree you are able. Special planning is called for in the event you are, or may be the recipient of federal or state benefits which are affected by the presence of other income or assets. A good settlement plan will provide the best quality of life possible given the resources available. It should protect against erosion, inflation and volatility. You may have only one shot at this, so make it count. Just like our tightrope walker – keep the right perspective and you’ll make it to the other side.
Mark Vogel, CSSC is a settlement consultant with Ringler Associates, the nation’s oldest and largest structured settlement company. He can be reached at (616)235-1400 or at mvogel@ringlerassociates.com
Mark Vogel, CSSC
Here is some practical advice on things you should consider when you choose a structured settlement.
What do chickens have in common with tightrope walkers? They both want to get to the other side. Look carefully and you will notice that the person on the wire isn’t gazing down at their feet. The chin is up and the eyes are front, looking straight towards their future. Planning a settlement should be done the same way. Here are some practical thoughts to keep in mind as you navigate through the process.
After a settlement is reached, you are the one who will live with it. The claims representative, attorneys, mediators and judges will all be working on another file, another set of circumstances. To them it represents closure. And while closure is good, remember that a settlement should be a means and not an end. It’s really a beginning. It also does not need to be rocket science. Common sense will carry you a long way. Begin by identifying your needs. Distinguish between immediate and future concerns. Distinguish between needs and wants. On the top of your list, write income.
Income is financial oxygen. Cut it off and things become very unpleasant, very quickly. Many people make the mistake of spending too much money too fast. Choose to live reasonably for a long time as opposed to experiencing the “flash in the pan” syndrome. A year or two of luxury isn’t worth enduring several decades of poverty. A structured settlement will help you overcome your greatest challenge – the erosion of your money. No matter how good someone has been at managing their resources, unlimited access to money plus time equals disaster. Think about the Grand Canyon – a little wind, a little water and before you know it there’s a big hole in your finances. Don’t fall into the trap of chasing returns. They will mean little if the money isn’t there. The tax-free nature of structured settlement payments means you can have an acceptable return with low risk. It also creates a strong framework on which to build a great settlement plan.
Public enemy number two is inflation. The longer the payout period, the more critical it is to have a plan for rising costs of living. Imagine hearing someone say, “that and twenty bucks will get you a cup of coffee.” At 4% inflation, that’s about how much a latte will cost today’s 25 year olds when they retire. Structured settlement income can be designed to rise over time. Growth oriented financial instruments can be a good hedge against inflation, but fall into the category of non-guaranteed funds. Used with the guaranteed payments of a structured settlement, you can create a plan with basic guarantees and long-term protection from above average inflation.
Number three on the things to keep in mind is liquidity. We all have regular monthly expenses (for which we need income). We also have larger expenses which occur less frequently, or at times when we least expect them. Your accident may have added some items to this category. Create a fund for these larger expenses and a have a plan to replenish this account periodically. You can do this with non-guaranteed funds or by having the structured settlement provide periodic lump sums at regular intervals. Remember that for every item on your list, you have three choices:
| Choice | Return | Liquidity | Erosion Risk | Use For: |
| Cash Account | Low | High | High | Emergency & Capital Needs |
| Structured Payments | Acceptable | Low | Low | Critical items on a list of needs |
| Non-guaranteed Funds | Varies | Varies | High | Inflation protection, flexibility |
Each choice is different and has its strengths and its weaknesses. Often the best choice is a combination of all three. Begin with income planning. You need food every day. Create enough liquidity to address the known upcoming expenses and a reasonable amount for the unknown. Watch out for inflation to the degree you are able. Special planning is called for in the event you are, or may be the recipient of federal or state benefits which are affected by the presence of other income or assets. A good settlement plan will provide the best quality of life possible given the resources available. It should protect against erosion, inflation and volatility. You may have only one shot at this, so make it count. Just like our tightrope walker – keep the right perspective and you’ll make it to the other side.
Mark Vogel, CSSC is a settlement consultant with Ringler Associates, the nation’s oldest and largest structured settlement company. He can be reached at (616)235-1400 or at mvogel@ringlerassociates.com