March 9, 2020 - If recent gyrations of the financial markets have you feeling like this guy, it's probably little comfort knowing others share your anxiety.
COVID-19, aka "the coronavirus," is a very serious matter that stands to jeopardize everyone's health unlike anything in living memory. As a result, markets are responding with the seriousness you'd expect from the possibility of the global economy grinding to a halt.
In our firm's
latest blog post
we shared the prediction of noted economist Nouriel Roubini that
global equity markets will decline "30% to 40% this year."
But you don't have to put your life's savings at risk. There are things you can do NOW to insulate yourself from potential financial ruin.
So, in an effort to help reassure clients who've placed business with us in the past that they made the right choices, and to help others assess things going forward, we present our thoughts on preserving your money.
Your Structured Settlements Are Safe
And they're still kicking.
In summary, if you structured, you're safe. Clients who convinced themselves they "could do better in the market" might be kicking themselves now, however.
They're Still a
For the same reason nobody would ever shell out big bucks for a brand-new Lamborghini and outfit it with bald tires from the Swap Meet, safety should always be your primary concern when it comes to financial decision-making.
Who cares if the safer tires cost more? Not dying takes precedence over value.
A majority of our clients are receiving large sums of money as a result of a personal, physical injury settlement. With their ability to earn a living often compromised and the need for guaranteed income to provide for themselves paramount, preservation of funds is essential.
Speculation is a luxury they cannot afford.
Even with rates depressed from where they were a few months ago, structured settlements still need to be valued as the foundation for any serious long-term financial plan for those settling an injury claim.
Let's Talk About Value
As exceptional as structured settlements for physical injuries are due to their tax-free nature, there are three areas where structured products present some of the best financial opportunities imaginable and where rate of return might not even matter:
All of these tax-deferral opportunities can help clients avoid unnecessary taxes by creating settlement, attorney fee, or sales options whereby funds are paid out over time to coincide with a more favorable tax position.
Because income is deferred, taxes aren't due until the year of receipt provided all the appropriate paperwork is drafted in advance of disbursement of funds.
This comes in handy when anyone in these above-referenced categories is anticipating a disproportionately large sum of money in any given year. When given the opportunity to spread that income out over time, taxes can be reduced because present and future tax brackets are efficiently managed,
Here's a real-life example of a quote I ran just last week for an attorney seeking to structure his fees:
Attorney is in his fifties.
Expects to be in the 50% tax bracket this year.
Anticipates a 40% tax bracket in three years and beyond.
Wants some "bridge" income from 2023-2026.
Even though he is only going to earn 0.92% on the quote,
by structuring he saves so much money on taxes
his structured fee is
the equivalent of earning 8.6%
Can you name me a financial planner who can guarantee an 8.6% guaranteed rate of return from a highly rated, highly secure company?
Situations vary but we're seeing similar results with others who come to us for advice once we have a chance to analyze their situation.
What About My Retirement Funds?