by John Darer CLU ChFC MSSC CeFT RSP CLTC
Many surveys have publicized that one of the greatest concerns of "seasoned citizens"** is running out of money, or not having enough money to live on. Given this information, I'm always amazed that some plaintiffs and plaintiff attorneys don't automatically think of a structured settlement for claimants or plaintiffs in the "sage age"**range category.
On March 17, 2006, the financial section of print version of USA Today published a chart titled "Value of Savings" which shows how long your savings would last, at various accumulated savings levels, assuming you withdrew $5,000 per month and earned 5% on your investments.
$250,000 5 years
$500,000 10 years
$750,000 20 years
$1MM 35 years
When you consider that a "geri-active"** 60 year old could live another 30 years or more this chart is a sobering thought.
While the chart gets "the point" across, a flaw in the chart (USA Today attributed to Fidelity Investments, Lipper and USA Today Research) is that the interest rate of 5% employs static analysis. A structured settlement annuity moves in a straight line***, but investments rarely do. Analysis based on Monte Carlo simulation, which takes into account multiple factors including investment volatility, is a perhaps more relevant way to view your situation.
Sequencing and Decumulation Risk | The Structured Settlements Fix
For more read Structured Settlements for Seniors and Settlement Planning for Older Age Plaintiffs
I use software**** that can be customized to explore a virtually infinite number of "what ifs?", incorporating a variety of different variables. Once you better understand the risk involved you may be more interested in the safety and guarantees inherent in structured settlements that are enhanced by tax efficiency.
**gentler terms for senior citizens (60+) from " Don't Call Them Old, Call Them…" Parade Magazine March 19, 2006
***for the purpose of this article I am just referring to fixed structured settlement annuities although there is a variable structured settlement annuity available through structured settlement brokers, affiliated with a broker dealer, holding a life insurance license with variable annuity authority, and appointed by the carrier offering this product.
****in addition to the software I use there is a quick and easy Monte Carlo retirement calculator at www.moneychimp.com. To be meaningful you will have to have some statistics about the volatility about investment class combinations (standard deviation to those of you who are statistically inclined) which are built into the software I use and is updated each year. Either way is more meaningful than static analysis
Last updated April 26, 2025
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