Sell my structured settlement? Is it worth it?
I’m up to my neck in student loans ($70k) and have a structured settlement for the next twenty years. I have a guy scouting things out for me that says a company will buy it for $280k when it’s total value – over the twenty years – is $620k. He also claims that if the money is put in the right places, it can accumulate more than that in twenty years as well as pay my loans off immediately. Any advice?
NPV of the payout will be very different in 20 years! The 2583.33 a month you get will slowly deteriorate in value due to inflation. Based on this question it is highly likely that you are and will be spending the money and not building towards Bradleys 3 mill nest egg at least for the next few years. That will nail your compounding interest significantly.
Remember that student loans are the cheapest form of money there is (% wise anyway). Do the math (oh and by the way drop that “guy scouting things out for me” like a hot rock) and remember that “a company” is getting 33% return on their investment whereas the best you will get is much less than that (plus taxes etc.)
If you are in a financial position to actually save the money and not spend it then I recommend giving Vanguard a call (try the STAR fund. If you are using it for day to day expenses or letting it sit in some silly low return account then apply the full payment amount to the principle of the school loans. At 2583.33 a month (rough guessing) it will only take 2.2 years to pay off the school loans. That leaves you with 18 years (or so- you get the point) to decide how you want to invest the remainder. I know that compounding interest can add up to mucho dinero in two years, but the loss equals much less than if you were to sell the settlement.
Capiche?
