Last Labor Day weekend, in one of my periodic posts discussing the fundamentals of my primary occupation, that being the structured settlement annuity business, I made the then unpopular assertion that the real estate market had peaked and was headed for serious decline in certain markets.
I mention it because this weekend, in what is the peak selling season for homes, you can't pick up a paper anywhere and not read about a local real estate slow down, increasing inventory of second homes, vacation homes and people who are dealing with a big jump in their adjustable mortgages. I worried about all this last summer when I had personal injury client after personal injury client tell me they wanted to "invest their award in real estate, because interest rates are too low and real estate never goes down."
Well, i'm not saying we are looking at a bust, but the fast, easy money in real estate has been made, and a lot of misinformed, over leveraged people are sitting on debt they can't afford and waiting for profits that will be years off in the future. Why bring this up again?
Primarily to tell you that when you look at the rise in interest rates, the excellent financial stability of most life markets, coupled with some really outstanding modifications to variable annuity offerings, that there has not been a better time for personal injury victims and trial lawyers to consider using structured settlement annuities again to fund their future cash flow and security. Rates on many longer term annuity contracts are well past 5% and in rated age cases at 6%, income tax free, which coupled with the security and certainty of payments makes it a key tool in any settlement planners arsenal.
The key thing to remember about structured settlement annuity contracts is that you have guaranteed, tax free cash flow that you can count on and that isn't subject to market risk, has very little credit risk, and does not require ongoing management fees. No other product can guarantee, if you choose, a life time income for you or a spouse, and people who risk their one settlement to plunge into risky hi-tech stocks, as they did in the 90's, or purchase real estate to lease or flip at a profit in the 2000's, are taking a gamble on their financial futures they can typically ill afford.
Some rules never change, and guaranteed, secured, tax free cash flow should be the bedrock foundation of almost every settlement plan, and then and only then, should the plaintiff, their family and advisors consider managed trusts, mutual funds, real estate or other riskier investments. I'm hopeful all the clients I knew who plunged into real estate with their settlement proceeds come out with a happy ending, but i'd feel better if they had listened and made sure the foundation was in place with the settlement annuity first, before they drawn to the siren song of their real estate experts.