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Dissipation
of Funds. Very few people have experience with
investing large sums of money. Without investment skills
and experience, you run the risk of losing or spending
your settlement money while you still have ongoing needs. |
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Risk Factor.
Most inexperienced people who invest in the stock market
lose money. Only about 2% of the who invest break even
and approximately 1% makes money. Investments that offer
a high rate of return most often carry the highest
risk of losing money. |
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Management
Fees. If you feel you must take a lump sum
settlement, have a professional handle your investing.
Remember that they will have full control of the
investment and will charge a fee for services and advice.
This fee can range between 3% and 6% of the lump sum
settlement each year. |
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Investment Paid Annually.
Interest income or dividends are usually paid semi-annually
or annually. If monthly payments are made, the rate
of return is often lower. This will require strict
budgeting on your part as most living expenses, such
as food, shelter and transportation are incurred on
a monthly basis.
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More Fees. Lump sum
settlements, when invested, will often allow for periodic
withdrawals, but withdrawing of money
will lower your monthly payments in the future. You
also have to pay a fee or penalty to get at your own
money!
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Cannot
be Indexed. Unlike Structured Settlements,
investments cannot be indexed, and to keep up with inflation
you will have to use more and more of your capital each
year , thereby reducing your future income.
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