June 12, 2025 - As we approach halftime of the 2025 Structured Settlement season, I thought this might be a suitable time to take stock of where things stand with respect to structured settlements and their place in the litigation resolution process.

Specifically, in a year when the stock market has shown wild gyrations and the economy can't seem to figure out which way to pivot, I'd like to pose the following questions:

"Do structured settlements still make sense?"

"Do they still offer good value?"

Although you can probably guess how a guy like me who specializes in providing structured settlement products and services might answer these two questions, I'm going to go you one better and provide you with a couple specific examples of recent settlements so you can judge for yourself.

Below are the end results of two recently (albeit slightly modified to avoid identification to actual cases) concluded, but hypothetical, injury settlements.

Jane Doe Hypothetical Settlement

Plaintiff is a 36-year-old CA female with a rated age (i.e., natural life expectancy adjusted due to medical conditions) of 40.

She elected to structure $1,000,000 of her net recovery.

She chose a plan that provided guaranteed LIFETIME monthly income with the first 25 years guaranteed to her designated beneficiaries in the event of a premature death.

How'd she do? Drum roll, please . . .

Guaranteed lifetime TAX-FREE monthly income = $4,763.04

Total projected TAX-FREE lifetime payout = $2,843,535

TAX-FREE Rate of Return (IRR) = 5.30%

Tax Equivalent Yield (TEY) assuming a 33% tax bracket = 7.91%

John Doe Hypothetical Settlement

Plaintiff is a 24-year-old CA male.

He elected to structure $500,000 of his net recovery.

He chose a plan that provides 20 years of guaranteed monthly income.

How did things turn out for this wise young man?

Guaranteed TAX-FREE monthly income = $3,278.46

Total guaranteed TAX-FREE income over 20 years = $786,830

TAX-FREE Rate of Return (IRR) = 5.03%

Tax Equivalent Yield (TEY) assuming a 33% tax bracket = 7.51%

A few things are worth highlighting about these two cases.

Tax Equivalent Yield Approaching 8.00%

You'd be hard-pressed to find ANY person who possesses even a modicum of financial and/or investment literacy argue that an investment earning in the 7.50% to 8.00% range isn't an excellent rate of return.

Especially for money which those in the financial planning community consider risk-free and is backed by some of the strongest, most solvent, and most highly regulated companies in the world.

If your financial advisor tells you a 7.5-to-8.0 percent guaranteed rate of return isn't good enough, you might want to start interviewing other advisors. Not only is this return better than anything you can get of similar risk for the security portion of an investment portfolio, but it's also commensurate with historical stock market averages which carry significantly more risk.

For some perspective on how good a rate of return like this actually is, check out the incorporated graph below and this link to a helpful website on financial education that is worth your time:

U.S. Stock Market Returns - a history from the 1870s to 2024

"Simple Average: the average return of the U.S. stock market has been

8.6% per year over the past ~150 years."

"Annualized Average: the return of the U.S. stock market has been

7.1% per year on an annualized average basis, over the past ~150 years."

So, What's Going On?

One thing that's made these longer duration structured settlement payouts so attractive recently is the uptick in longer term security yields. Because the yield on the 30-year Treasury is the highest it's been since 2007, this is the perfect time for those given the opportunity to lock in a structured settlement earning historical stock market returns without the stock market risk.

Even though structured settlement rates don't move in lockstep with the Treasury market, they tend to move in the same direction (with structured settlement rates typically a bit better).

What This Translates to in the Real World

While there may be countless reasons for clients to reject structured settlement offers, "I can do better myself" should never be one of them. Yes, it's possible to outperform structures like these when you go it alone. But one would need to be very lucky.

Interest rates are always in flux; however, we've been in a buyer's structured settlement market of sorts for the past few years, which makes structures a better value today than we've seen in decades.

Most importantly, though, is the impact these structured settlement decisions will have on Jane and John's lives going forward once the ink on the settlement agreement dries. For real world implication, consider:

Jane Doe's TAX-FREE $4,763.04 per month is the equivalent of a

TAXABLE job paying $85,308 annually. In her case, FOR LIFE.

John Doe's TAX-FREE $3,278.46 per month is the equivalent of a

TAXABLE job paying $58,719 annually. Guaranteed for 20 years.

These types of cash flows will come in very handy to these young people who may have difficulties finding suitable employment following their accidents. Or maybe they can treat this like a second income so one spouse can stay home while raising a family.

Adding certainty in an uncertain world is good for the soul. Plus, there's just something about tax-free income that appeals to any demographic.

And Finally

When calling for structured settlement quotes, bear in mind that rates of return will vary based on the deferral and duration of the payout pattern desired. You can expect shorter duration quotes to result in lower yields than the ones Jane and John received.

But make no mistake, the smart move is almost always going to be securing some portion of your future when settling a personal injury claim. Keep some money for your immediate needs but, for your own peace of mind and future security, structure something.

Thank you for the opportunity to be of service and best wishes to you for continued success in your personal and professional lives. I hope you find this information helpful. Call anytime I can help.

Dan Finn, CPCU, MSSC®, RICP®

Master's Certified Structured Settlement Consultant®

Retirement Income Certified Professional®

"Building lifetime client relationships!"

Dan@FinnFinancialGroup.com | 949.999.3322 | FinnFinancialGroup.com

CA Insurance License: 0A96173

DISCLAIMER: We present this newsletter for educational purposes only using material freely available in the public domain and it should not be construed as containing tax, accounting, investing, or legal advice. Any guarantees referenced subject to the claims paying ability of the issuing carrier. Any discussion about specific or implied life company quotes, rates, etc. should be considered hypothetical as all are subject to change and may vary by state of issuance. All rights reserved.