Financial Comparisons
Select a different option from the menu below to see how it compares to a Structured Settlement:
Structured Settlements versus Education IRAs
| Issue / Concern | Structured Settlement | Education IRAs |
|---|---|---|
| What types of securities/insurance products support the payments? | A fixed annuity contract issued by a life insurance company. | Offers a variety of investment options and rates of return |
| Can this option provide a stable, lifetime income? | Yes. Payments and distribution schedule are determined up front. Can provide a dependable, predictable income stream that you cannot outlive. | No. This option is designed only as a savings vehicle for qualifying educational expenses. |
| Is there a guarantee with this option? | Yes. The annuity issuer guarantees payments, according to the terms of the structured settlement agreement. | No guaranteed return on investments. |
| What are the costs and fees associated with this option? | No additional cost to annuitant. | Involves account management and securities management fees. |
| Will this option keep pace with inflation? | A cost-of-living adjustment (COLA) feature is available that can help offset the effects of inflation. This option must be elected when the settlement is designed. | Not predictable since investment returns will depend on market factors. |
| What are the tax consequences? | Income provided by a qualified structured settlement is TAX-FREE, provided the damages received as periodic income (other than punitive damages) are the result of personal physical injuries or physical illness. | Tax-deferred. Withdrawals are tax-free only if funds are used for qualifying educational expenses. |
| Is this option affected by market fluctuations? | No. Benefit payments are determined and fixed at the time the annuity contract is issued. | Yes. Any earnings from principal will be affected by market ups and downs. |
| Can I make changes to this option after I select it? | No. The payment amount and schedule are fixed and may not be changed or accelerated. | Subject to annual income and contribution limitations. Cannot be used with other education tax incentives. |