by John Darer CLU ChFC MSSC CeFT RSP CLTC
Look over yonder
What do you see?
Interest Rates rising
"Crystal Ball Persuasion" (a parody of Crystal Blue Persuasion by Tommy James & The Shondells)
At the tail end of the 2008-2009 financial crisis, the smoke signals wafted over from Vancouver, citing the media, predicting that interest rates were expected to rise and that you should sell your structured settlement THEN "because rising interest rates will make you poorer". Then I proceeded to "take the mickey" when the rising interest rates did not materialize. They actually got worse. Anyone who would have sold structured settlement payments for pennies on the dollar, just for the sake of bowing to the crystal ball of persuasion to avoid loss of money, would have actually done worse by selling.
But interest rates have been recently been creeping up and I thought it would be worth having another "look see", so that readers can see the history and learn something from this.
June 28, 2009 1O Year United States Treasury 3.487% Close
"You may have heard in the media in recent weeks that interest rates have bottomed and are slowly creeping back up. I (Proctor)believe that this is the beginning of a new cycle of incremental increases in interest rates over the next few years. When interest rates go up, the present value of a person’s structured settlement goes down. This is a simple truth. As such, if you are considering selling your structured settlement, now is the time to get the best rate".
March 26, 2010 10 Year United States Treasury 3.705% Close
The first foghorn wasn't convincing enough, so another toot was made less than a year later to attempt to COMMAND the annuitants to sell, to unsettle annuitants
"WARNING AGAIN: If you are thinking of selling your structured settlement payments, do it NOW (the command!), before interest rate increases eat into the value of your future payments and make you poorer". Genex Capital CEO Roger Proctor
What Actually Happened With Interest Rates?
A 13 year retrospective on the 10 Year United States Treasury (June 28, 2009 to September 9, 2022)
Lowest 0.32% April 2020 during the beginning of the Covid-19 pandemic
Delta 3.69% Difference between the highest and lowest
If confronted with a similar solicitation from a structured settlement factoring company, an important thing to consider is the Internal Rate of Return on what was paid to fund your structured settlement. How do you do that, you say?
The chart below goes back 20 years.
A 20 year retrospective on the 10 Year United States Treasury (June 28, 2009 to September 9, 2022) Source: Macrotrends
How Bad Did Annuitants who Sold Their Structured Settlement Payments Due to a Fear of Rising Interest Rates Get Screwed?
Above is the 54 year chart, alossourced from Macrotrends.com. So if we go back to 2009 or 2010 when Genex was encouraging the sale of structured settlements for what amounted to pennies on the dollar for fear of rising interest rates, we can see that anyone being approached to sell existing structured settlement payment rights in 2009 or 2010 was likely benefiting from a higher income tax-free rate (IRR) guarantee on their existing structure. If you sold your structured settlement payments that you were established in the 1980s or 1990s and it wasn't ELNY, you would have been screwing yourself.
When you already have a structured settlement and are receiving (or scheduled to receive) steady future future periodic payments, you are lock into the rate of return. It's a strength and a weakness. The strengths outweigh the weaknesses.