So first the good news: according to the numbers, there is no inflation in the economy at the moment. In fact, the inflation rate is currently slightly negative by slightly more than one percent. That’s especially good news if you are holding on to a structured settlement, because the one real flaw in such settlements is they are not scaled for inflation.
There was also good news on the national economy last week. The Gross Domestic Product expanded at three and a half percent last quarter, indicating the recession could be coming to an end. However, all this good news doesn’t necessarily mean it’s time to sit back and relax.
The economic growth has sparked anew a debate in Washington that inflation may start creeping back into the economy sooner than later. That could mean the value of your settlement may start changing in more ways than one.
Inflation: The Enemy of Most Annuities
While structured settlements can be a good choice for many people, inflation can really ebb away at one. Unlike pensions, which have protection against inflation, structured settlements do not.
To put this in perspective, consider a settlement worth $100,000 in 1994. Using calculators available at inflationdata.com, in the 15 years since that settlement inflation has risen 44.56%. This would mean that money today would be worth $144,560. However, because it is not scaled to inflation, it is still only worth $100,000. That means if you had had that money in hand, you would theoretically have made more than $40,000 (assuming you had not simply spent the cash).
Buy low, Sell High
If you have been seriously considering selling your structured settlement, but holding back because with negative inflation you are in pretty good shape, you have been right. However, if selling is seriously on your mind, it’s a good idea to do it before the inflation starts to hit. Because when it does, the overall sale value of your settlement is likely to drop. The trick is to get in front of the bad news, which means starting to act when things are still going well.
All of this can be rather tricky and nobody should wade through this mess alone. At Sovereign Funding Group we will help you make an informed decision when you consider selling all or part of a structured settlement. Call us today at 877-836-4661.
