by John Darer® CLU ChFC MSSC RSP CLTC
The largest city in the largest county in the lower 48 states is to declare Chapter 9 bankruptcy. Investment News says "Get used to it!" as San Bernardino, California's city counsel voted to seek Chapter 9 protection. San Bernardino, a city about an hours drive from Los Angeles, follows Stockton and Mammoth Lakes into bankruptcy.
One of the major reasons that people buy municipal bonds is that the income is tax-free )just like structured settlements. Plaintiffs may hear recommendations to buy municipal bonds instead of structured settlements due to bloated yields. The risk premium for San Bernardino was an additional 4% according to Investment News, leaping from 7% to 11% in a day. Don't chase the high yields.
Structured settlements don't offer yields that high but the income is tax-free in the case of physical injury,physical sickness, wrongful death and worker's compensation. Moreover, annuity funded structured settlments offer income that is safe, secure and guaranteed by some of the biggest public corporations in the world. Treasury funded structured settlements offer income that is tax free for the same types of cases AND backed by United States government obligations.
Would you feel safer receiving tax-free income from the likes of:
Berkshire Hathaway, Allstate, MetLife, Prudential, John Hancock, New York Life, Liberty Mutual, Mutual of Omaha or Pacific Life?