Rescue Capital Blog Your Money, Your Way

21Jun/12Off

Bad credit not relevant with structured settlements

Posted by Dawn Anderson

When you’re suffering financially, waiting for payouts from a structured settlement annuity isn’t the most convenient way to get bad credit ok at Rescue Capitalmoney.  Clearly it would help if you can have access to your money sooner perhaps in a lump sum payment. Maybe you thought about looking into it before but delayed calling because you have bad credit and were afraid you wouldn’t be approved. The good news is that selling your future payments allows you to get the cash you need without borrowing money. It is not a loan it is a transfer of the legal rights to your future payments. So there is no money to pay back or credit approval.

The only way to improve your credit is to pay off your debt and selling your structured settlement could be the key to financial stability. Use the cash lump sum to pay off your credit cards or avoid foreclosure and invest the remaining funds to start earning interest for you. It is time to take control of your finances and reap the benefits of your money.

Working with Rescue Capital to sell your structured settlement for a lump sum has some benefits too. We can custom tailor the package to suit to your needs and goals. They can help you develop a plan to pay off your debts and work with your creditors to pay off the debts immediately. We’re also here to answer your questions without delay. Remember, the money is legally your property so why not use it to suit your needs.

You don’t have to sell you entire settlement. You can sell only part of your settlement, keeping some of your scheduled payments and have an influx of cash for your immediate needs. Cashing out your structured settlements can give you more financial freedom which is something everyone can use.

Don’t delay getting the facts about your financial situation. Call Rescue Capital today to discuss your situation and make your structured settlement to work for you. Call 866.688.3532 for your free no-obligation quote.



7Jun/12Off

Structured Settlement Surveys: Are they statistically relevant?

Posted by Dawn Anderson

Last week J.G. Wentworth released a press release stating that only 6.6% of structured settlement recipients sell their future payments and that those who do sell commonly cite getting out of debt, purchasing a home or vehicle, unexpected medical bills or continuing their education as reasons for selling. [i]

The press release stated that the study was based upon data collected by J.G. Wentworth over the past 20 years but it did not provide any further details regarding the data collection. For instance, how did they obtain the data; how many people were included in the study and did it include data from other factoring companies besides J.G. Wentworth/PeachTree? In addition, there was no mention as to whether discount rate played a considerable role in the annuitants’ decision to sell.

Back in 2008, J.G. Wentworth published an email survey of 115 respondents who previously sold some or all of the payments to J.G. Wentworth in exchange for a lump sum payment. In this survey, only 18% said they were completely satisfied with their structured settlement. 31% said they didn’t wish that there attorney negotiated a single lump sum payment which means that many of them would have liked a lump sum payment. 60% of the respondents sold their payments to pay bills while less than 5% did so in order to buy a house. 30% stated that they would not sell their payments again. J.G. Wentworth only released 9 questions to an industry blogger and did not reveal the remaining questions, the number of individuals the survey was sent to or any other circumstances that could have skewed the results of the survey.[ii]

In the 2006 The National Structured Settlement Trade Association (NSSTA) survey of attorneys involved in structured settlements (43 telephone surveys) and structured settlement recipients (1275 telephone and Internet surveys) 75% of annuitants were happy with their structured settlement and would recommend one. [iii]

In an AIG survey of 1,000 participants, 65% of respondents said they would elect a lump sum payment, while 26% stated that a lump sum was more appropriate to pay bills.[iv]

So if that many people wanted a lump sum payment then why aren’t they selling? In a review of 100 recent factoring transactions it was revealed that the average discount rate was 13.75% with 7.5% being the lowest and 20% being the highest. So you have to question whether the 93.4% of individuals that chose not to sell would have changed their mind IF the discount rate was closer to the 7.5% rate.

As structured settlement annuity premiums continue to decline (10% from 2010 and 20% from 2008)[v], there will be fewer annuitants available to market. While it seems perfectly logical that this would in fact lower the discount rate, if one looks at current trends it mostly will not occur.

For example, the top three companies spend millions of dollars a year in order to entice annuitants to sell. They’re all well established and are household names. Smaller, lesser known companies cannot afford to go head to head in advertising spends with these industry giants so they tend to focus on non-traditional marketings. While some sellers will seek out these smaller players in order to obtain better rates more often than not a first time seller will call one or two companies they see on TV. Which basically means they are going to receive rates of 13% or higher.

While the decline in annuities does not currently seem to be an issue for J.G. Worthworth/Peachtree who already completed a $244 Million Securitization this year[vi], one has to wonder whether primary market decline and increased competition combined with well informed, tech savvy consumers could adversely affect their business in years to come.

J.G. Wentworth had securitizations worth $469,000,000 in 2011 and $579,000,000 in 2010.[vii]  This represents 9.4% and 10% of the annual premiums for those years.


 



4Jun/12Off

Boston College’s Center for Retirement Research suggests using Social Security for Retirement

Posted by Dawn Anderson

The Center for Retirement Research at Boston College released a study stating that the best way for people to utilize their retirement income more effectively is to “buy” an annuity from Social Security. This statement, of course, is completely misleading and the whole concept should be investigated further[vi]

According to Pat Foley, president of U.S. life insurance distribution and marketing at Genworth Financial, approximately 10,000 people turn 65 every day and this will continue over the next 20 years.[i] As these individuals approach retirement age armed with only their 401k plans and Social Security as their only means of support once they stop working, there is a huge need to minimize risk while preserving wealth. Fluctuation interest rates as well as longevity are all issues to consider. Obviously, no one wants to outlive their savings or pay huge fees to protect their nest eggs but recommending Social Security as an option seems a little optimistic.

No one can “BUY” an annuity from Social Security. You delay claiming your Social Security benefit in order to get a higher pay out later. Instead you’re using your savings to support yourself. Here’s the one major problem with that. What if you spend your cash supporting yourself to hold off for the higher Social Security payout only to discover there is nothing left when it comes time for you to retire?

In their 2011 report, the Social Security Board of Trustees stated that by “2023, total income and interest earned on assets are projected to no longer cover expenditures for Social Security, as demographic shifts burden the system. By 2035, the ratio of potential retirees to working age persons will be 37 percent — there will be less than three potential income earners for every retiree in the population. The trust fund would then be exhausted by 2036 without legislative action.”[ii]

Therefore if you didn’t invest your money, decide to live off your cash and use Social Security as your annuity you could be in for a rude awakening come 2036. While annuities do have their faults—they’re expensive, underperformers and restrictive—for the most part they do provide risk adverse individuals with a guaranteed income stream.

Some products, like Indexed annuities, take hybrid approach from variable and fixed annuities because they have stability of a fixed annuity with the growth potential of a variable annuity. Indexed annuities have a loss provision which protects the nest egg even if the stock market goes down. Unless you make a withdrawal, the value of your annuity will not decrease. The insurance company invests most of the principal in bonds ensuring the policy generates a small annual return. In addition, the insurer uses a small portion of the premium to buy options in a stock market index such as the S&P 500. Options that are exercised can result in additional interest credited to a policy.  As the demand for more risk adverse products rise, insurers will create newer products with better growth potential. [iii]

Apparently other government entities believe that annuities would be a good investment vehicle for retirement. In July 2011, US Government Accountability office (GAO) put out a report stating purchasing an income annuity from an insurance company is “an alternative to self-managing periodic distributions from savings" because it protects retirees from underperforming investments, overspending as well as from the risk of outliving their savings. It also claimed that inflation adjusted annuities reduces the risk of diminished buying power. Also some experts dispute that claim.[iv]

Other things to consider

Some investments allow the investment to be passed on to heirs. Social Security survivor benefits are for spouses and dependent children as well as disabled children only. If your financial situation changes some investments like annuities are not easily converted into cash. Some can’t be cashed out without suffering penalties and some cannot be cashed out at all once you start collecting. While some annuities can be sold on the secondary market for a discount, some cannot. Social Security, on the other hand, can not be liquidated or sold.

When it comes to retirement savings you’re never too young to start saving. It is also important to consider asset allocation and getting professional advice. Asset allocation is not putting all your eggs in one basket so if things go wrong in one investment class you don’t lose everything. [v] If you rely solely on one type of investment, especially one that is extremely inflexibl,e you’re leaving yourself open to possible financial hardship in the future.

[i]http://rescuecapital.com/blogs/2012/01/genworth-re-enters-the-indexed-annuity-market/



7May/12Off

Structured Settlement Bone Yard

Posted by Dawn Anderson

For as long as I can remember people have hated the industry I worked in—structured settlement factoring; terms such as white hat and black hat were often used. Financial professionals as well as some consumers have often compared us to the modern day equivalent of snake oil salespersons because we buy future payments. They imply that we’re doing something wrong for providing liquidity to assets that annuitants can’t use as collateral.

Lawyers and legal settlement planners with their crystal balls create settlements for individuals, planning out their future financial needs. At settlement or during a mediation they do what is believed to be best for the plaintiff and potential structured settlement recipient, but, in reality, we can’t foresee the future and the only certainty in life is death and taxes. People lose jobs, get divorced, owe taxes and suffer from illness without notice. Life changes and so do people’s financial situations. That’s why structured settlement factoring exists.

Financial pressure can be enormous. Sometimes people are desperate enough to do anything to get out of their situation and will make hasty decisions. Other times they just know what they need. They have weighed the options, done the math and selling some of the future payments makes sense. They don’t have to sell all the rights to their future payments, just enough to get what they need to help themselves out of a tough situation.

In every industry there are a few individuals or companies with questionable ethics. There are also companies where integrity and ethics prevail. These companies offer competitive pricing and look out for their clients’ best interest. Their rates are consistently lower than most credit cards, cash advances and payday loans. Also since selling future payments isn’t a loan they annuitant isn’t creating additional debt.

One huge misconception is that all factoring companies pay only a small fraction of what the payments are worth.  That is to say, the present value of a future payment today will be less than the principal amount when it comes to maturity.

Here’s an example that will help you understand. Let’s say Jane is offered the choice of $100 today (present value) or $100 next year what should she do? Take the money now because it is worth more now than in the future. When buying structured settlement annuity payments, a factoring company uses a mathematical calculation to figure out how much your future payments are worth in today's money taking into account inflation rates and interest rates. In addition, if Jane took the $100 today and invested it she would have more money in a year.

Many detractors want you to believe that the annuitant would receive a microscopic amount compared holding onto the annuity. They fail to consider the future value as well as the diminished buying power of the money. Seriously folks do you think the factoring industry would still be around if people were being swindled out of their money? Forty-six US States and the Federal Government have enacted consumer protection statutes to make sure these transactions are in the best interest of the seller. If New York State is an indicator, contracts with ridiculous rates will not be approved.

Selling future periodic payments isn’t something that should be done in haste. By researching the companies before you call them you can avoid the hassles of dealing with companies with bad reputations. If there are no complaints with the Better Business Bureau AND your state attorney general’s office, call for more information. Don’t be afraid to look on the Internet to see if others are complaining on websites like Rip off Report.

Make sure you get a few quotes before you sign on and get everything in writing. Don’t just take the company’s word for it, read everything they give you. Beware of hidden fees, bait and switch offers or salespeople trying to pressure you into signing. If you don’t understand what you’re reading have a trusted advisor review it. In a dog eat dog world of finance, don’t be caught wearing milk-bone underwear—look at for you and your best interest.