Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

Another Boom to Bust Athlete Story That Could Have Been Prevented : Allen Iverson

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Allen Iverson knows how to play basketball. He also knew how to spend and spend he did. Iverson was among the biggest superstars in the NBA, an 11 time NBA All-Star (2000–2010) earning more than $154 million during a professional career that began back in 1996 (not including endorsement money and other business deals). According to a February 14, 2012 article, he was having trouble paying his bills.

How did Iverson lose so much?

Loyal to his friends from a youth spent in Virginia, Iverson traveled with one of the biggest posses in professional sports Read the rest of the story in Allen Iverson Has No Answer For Financial Woes The Post Game February 14, 2012

Let's talk about a" three point play" for basketball players like Allen Iverson.

By structuring endorsement fees, professional athletes and other celebrities can help mitigate the over spending problem and provide a stable foundation of income backed by a Fortune 100 insurance Company. This can help you stroke that ball for the long haul.

If you receive fees from product or service endorsements, or represent someone who does, have you considered structuring the income? If that endorsement fee otherwise represents taxable income that you're not going to spend this year, consider a non qualified structured settlement. This should be of interest to movie and television celebrities, athletes, executives and CFOs at companies who hire celebrities to endorse their products, producers and contest sponsors, agents and CPAs

I'm Here to Help 888-325-8640

Structured Settlements for CT Residents More Valuable Due to CT Income Tax Increase

by John Darer® CLU ChFC MSSC RSP  CLTC

Connecticut Budget bill (S.B. 1239), signed May 4, 2011  by Connecticut Governor Dan Malloy, will increase CT personal income tax rates retroactive to January 1, 2011.

The new marginal income tax rates apply for those with taxable incomes of more than $100,000 for joint filers; $50,000 for single filers and married filing separately; and $80,000 for heads of households.  A legislative analysis of the budget, states S.B. 1239 does so by: 

• increasing the number of tax brackets from three to six;
• splitting the existing 5 percent bracket into four brackets and adding three higher marginal tax rates to that taxable income;
• increasing the top marginal income tax rate to 6.7 percent from 6.5 percent;
• and reducing the taxable income for the 6.7 percent rate bracket by half

The measure also phases out the lowest (3 percent) income tax bracket starting with Connecticut adjusted gross incomes of more than $100,500 for joint filers; $56,500 for singles; $78,500 for heads of household; and $50,250 for married couples filing separately.  The legislative analysis said it does so by subjecting increasingly less taxable income to the 3 percent income tax rate as Connecticut adjusted gross income increases and moving the phased-out taxable income to the 5 percent bracket.

Marginal increases in state income taxes increase the intrinsic value of a structured settlement, structured attorney fee or non qualified assignment  (taxable damage structured settlements) for Connecticut plaintiffs, claimants and plaintiff lawyers. Under current Federal tax law structured settlement payments that are for payment of damages for physical injury or physical sickness, or workers compensation,  are excluded from gross income under Section 104(a) of the Internal Revenue Code*.  There is also no state income tax for such payments. Structured attorney fees, employment structured settlements and other forms of non qualified structured settlements and assignments,  offer tax deferral options. 

For more details, contact  Connecticut settlement planning expert John Darer CLU ChFC MSSC  CeFT RSP at 203-325-8640

 

* Since 2016, Damages for wrongful imprisonment are also income tax free per IRC Section 139F. Wrongful imprisonment damages can be structured

SOA What? Almost 50% between 45-70 Ill-Prepared For Lifetime Income and Healthcare Needs

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Almost 50% of Americans between the ages 45-70 have no financial plans in place to protect themselves against outliving their assets and the rising cost of healthcare should they live longer than they expected, according to a new survey released today by the Society of Actuaries (SOA). Additional findings show more than one-third are worried about running out of money during retirement, but only 20 percent plan to purchase an annuity or other form of guaranteed lifetime income to protect their assets.

Plaintiffs, claimants and attorneys should not fail to consider a balanced approach and plan for longevity risk as well as other exposures such as disability, long term care, the loss of income and physical support of a spouse due to death or diability. Those who avoid even considering structured settlements, annuities, life insurance, disability insurance, healthcare financing methods such as Healthcare Savings Accounts (HSA), or long term care insurance could be left holding the bag.  For example,   if you are parents of a child with a profound disability, as part of your overall financial planning, be sure to account for your own needs with your own resources, in addition to considering the needs of the child.

We can help. Call us toll-free 888-325-8640.

 

Structured Settlements: The Ultimate in Predictable Income

Structured settlement expert and Registered Settlement Planner John Darer®, CLU ChFC MSSC RSP CLTC discusses different aspects of structured settlements and different strategies and solutions in today's market in this latest video shot in late September 2010.

Annuitize Part of Annuity, Continue to Defer Part of Annuity HR 5297 Passed by Senate

by John Darer CLU ChFC MSSC RSP CLTC

If  you hold an annuity outside of a retirement plan it may get easier to annuitize only a portion of your annuity contract while allowing the remaining amount to grow tax-deferred

The small-business lending bill HR 5297 which just passed in the United States Senate,included a provision enabling just this very thing.

The Retirement Income Journal reports that HR 5297, which passed the Senate by a vote of 61-38, resembles an earlier version passed by the House of Representatives, and reflects an idea that has been around for a while. "This is something that has been proposed before," said Whit Cornman, an ACLI spokesman, citing work by Sens. John Kerry, D-MA, Max Baucus, D-MT, and Rep. Earl Pomeroy, D-ND.   

Please note that differences between the House and Senate versions of the bill still need to  be resolved and there is little time to complete this before the upcoming November elections. According to Congress’ Joint Committee on Taxation, the annuities provision would generate revenue of $956 million over ten years, from 2011 to 2020.

The ability to do a partial annuitization represents a  welcome income planning option 

Have questions about stable income planning? Want to see an immediate or deferred income annuity quote, please contact John Darer at 888-325-8640 or via email to [email protected].

Immediate Annuities: "The Ultimate in Predictable Income", Says Investment News

by John Darer CLU ChFC MSSC RSP CLTC

A diverse collection of safe income producing strategies, including immediate annuities, is important for a comfortable retirement according to Five Ways To Boost Retirement Income, an article by Jeff Benjamin in Investment News (a publication which claims to be "the leading news source for financial advisers"), published September 19, 2010.

"...the best way to ensure enough flexibility to move in and out of riskier assets and strategies is to establish a steady and predictable income stream that will enable clients to ride out a stretch of lean years". Investment News September 19, 2010

The 5 strategies addressed in the article are:

• Immediate annuities, which Investment News dubs "the ultimate in predictable income"
• Individual bonds. The article states "Bonds are obviously a critical part of an income portfolio, but in a rising-interest-rate environment — which is likely over the next several years — individual bonds have a distinct advantage over pooled-mutual- fund strategies. As opposed to bond funds, which are never as nimble as a separately managed and customized bond portfolio, the idea here is to shift the emphasis from risk tolerance to income objectives".
• Reverse Mortgages  The article states  "While reverse mortgages are still a long way from being the first choice for most retirement income strategies, they do represent an opportunity that is worth considering. One reason reverse mortgages will continue to gain popularity among retired people is that unlike home equity loans or second mortgages, the loans are not structured based on income or an ability to make payments"
• • Investment News issues this caveat "On the surface, the idea of enabling older homeowners to convert part of their real estate equity into tax-free income while staying in the home seems like a no-brainer. The trouble is, since reverse mortgages started gaining popularity in the late 1990s, many senior citizens have been victimized by shoddy sales practices. A cited quote says "It's still The Wild west out there".  But "as the 70 million members of the baby boom generation hit the qualifying age for a reverse mortgage (62), there is good reason to believe the forces of supply and demand will lead to significant improvements in the way these loans are sold, structured and maintained".
• Convertible Bonds  Investment-grade convertible bonds can introduce some capital appreciation to a portfolio heavy on income-producing intermediate-term bonds.
• Master Limited Partnerships- article discusses how  teh packaging of master limited partnerships into mutual funds, exchange-traded notes and exchange-traded funds is introducing a viable way to hold these higher-yielding investments in qualified retirement accounts with a less complicated tax structure.

Although the article does not specifically discuss structured settlement annuities, plaintiffs often face the same issues as retirees as their disabilities, or the loss of a primary bread winner may, in effect, make them "retirees" Furthermore, a structured settlement is a "souped up" form of immediate annuity that can also be a deferred annuity and can have more than one payment stream to address multiple needs as to timing and amount.

Investment News' immediate annuity strategy is the "longevity insurance approach",   to write life only annuities that cease payment upon death to maximize yield. They refer to this as " the no-load version, skip the death benefit, just lock in the income"

This is all well and good if you have life insurance to offset loss of principal if you care about the possibility that you could die before the cost of the annuity has been paid out. For healthy and insurable retirees it may be is a superior strategy because this risk can be mitigated with life insurance. It IS possible to find 20 year level premium term insurance through issues ages as old as 70. For more information call me at 888-325-8640 or email me at [email protected]

I do have a technical criticism of the article where it gives the following example of an immediate annuity:

"A current-market-rate example for a 70-year-old married couple is a 6.7% annual yield for life, which includes all fees.

Depending on the size of the initial premium, the annual income from a 6.7% yield might seem low, representing a non-inflation-adjusted annual income stream of $6,700 on a $100,000 one-time premium".

Investment News uses the yield on the principal investment without disclosing that a portion what it states as the "yield", includes a return of principal component. If you invest $100,000 in a 10 year Treasury bond that yields 2.7% annually, and hold it to maturity, you get the 2.7%  and you still have the $100,000 at maturity, whether you live or not.

"We Don't Live on Lump Sums; we live on income": The Case For Annuities-1

by John Darer® CLU ChFC MSSC RSP CLTC

We Live on Income

In this month's Advisor Today John Rafferty, VP Marketing at American General opines that understanding the "lump sum-to-income" conversion math is not second nature to most people and that a better retirement can be created by helping people adopt an "income"mindset.

As Rafferty points out the Senate thinks this is so much of an issue that a bill was introduced December 3, 2009 to rectify the situation (at least for those covered by ERISA Retirement plans).

The following is a summary of he proposed act written by the Congressional Research Service, a well respected non partisan arm of the Library of Congress:

S2852 "Lifetime Income Disclosure Act - Amends the Employee Retirement Income Security Act of 1974 (ERISA) to require the quarterly pension benefit statement furnished to a participant or beneficiary with the right to direct the investment of assets in his or her account under an individual account plan to include a lifetime income disclosure at least once every calendar year. Requires such a lifetime income disclosure to set forth the annuity equivalent of the participant's or beneficiary's total benefits accrued. Defines an annuity equivalent of the total benefits accrued as the monthly annuity payment the participant or beneficiary would receive at the plan's normal retirement age if those total accrued benefits were used on the date of the lifetime income disclosure to purchase certain qualified joint and survivor life annuities whose annuity payments would commence at the plan's normal retirement age. Directs the Secretary of Labor to: (1) issue a model lifetime income disclosure, written in a manner which can be understood by the average plan participant; and (2) prescribe assumptions that plan administrators may use in converting total accrued benefits into annuity equivalents. Declares that no plan fiduciary, plan sponsor, or other person shall have any liability under ERISA solely by reason of the provision of annuity equivalents derived in accordance with such assumptions and related rules and including explanations contained in the model lifetime income disclosure". (Underlines and bold added by this author for emphasis)

Why stop at retirement planning? 

How about:

Life insurance proceeds?  Most life insurance companies give a beneficiary a number of settlement options for the proceeds, which include lifetime income options. Many also include a retained asset account to help beneficiaries pay immediate bills to buy time and provide a decision free zone while they work through the intricate emotional issues that follow a sudden money event

Lottery proceeds? We've all read the pathetic stories of poeple who have won bazillions of dollars or pounds who have managed to squander this money in a very short period of time. The problem is that there are too few options (basically income or cash) and nothing in between. Intead of giving the tabloids the ability to exploit the worst in human frailty. there should be mandatory disclosures and an option or options that offer a  percentage into an annuity instead of all or nothing.

Personal Injury settlements? Divorce settlements? Workers Compensation settlements? Why not make it mandatory that a structured settlement is offered as a choice? Most personal injury attorney have anecdotes from their own clients and have heard or read of others. While many attorneys have a good sense some dismiss a structured settlement without giving their client the opportunity to make the decision. From time to time I have received calls from people "after the fact" and have to tell them that it is too late to receive an income tax free structured settlement.

To be continued...