Financial Comparisons
Select a different option from the menu below to see how it compares to a Structured Settlement:
Structured Settlements versus Equity Mutual Funds
| Issue / Concern | Structured Settlement | Equity Mutual Funds |
|---|---|---|
| What types of securities/insurance products support the payments? | A fixed annuity contract issued by a life insurance company. | An investment company operates the fund, pooling the assets of many investors and investing in equity securities. |
| 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. | Historically, equities have shown the greatest potential for long-term growth. But they also entail a higher degree of investment risk, which means they may not be a reliable source for ongoing income needs. Earnings may stop altogether if fund performs poorly. |
| Is there a guarantee with this option? | Yes. The annuity issuer guarantees payments, according to the terms of the structured settlement agreement. | No. Share prices and returns will fluctuate with investment performance. |
| What are the costs and fees associated with this option? | No additional cost to annuitant. | Management and expense fees cover the costs of managing the fund and are deducted from returns. Fund may also charge a front- or back-end "load" (i.e., sales charge), redemption fees (paid by investors when they "redeem," or sell shares) and 12b-1 charges. |
| 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. | Designed for long-term growth. Historically, a good choice for keeping up with inflation. Total return will depend on the performance of underlying securities. Past performance is not an indicator of future results. |
| 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. | Taxes must be paid as income is earned and distributed. Capital gains or losses from sales of mutual fund shares have additional tax consequences. |
| Is this option affected by market fluctuations? | No. Benefit payments are determined and fixed at the time the annuity contract is issued. | Fund yield, share price and return will vary, depending on market conditions. You may have a gain or a loss, depending on when you sell your shares. |
| 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. | Money can be withdrawn or moved from one mutual fund to another. Charges, fees and taxes may apply to each transaction. |