I often receive solicitations from the California Institute of Finance at California Lutheran University about its Financial Planning program. Today an excerpt from a Steve Vernon book caught my eye
"Don’t consider your lump sum as money you can spend in retirement. I know this sounds weird, but stay with me for awhile. My worry is that you might think you’ve got a lot of money, so you buy a new car, take lavish vacations, and before you know it, your resources have dwindled significantly. Instead, consider your lump sum as a generator of a monthly paycheck. Then, spend no more than this paycheck. We’re used to living paycheck-to-paycheck while we’re working, so let’s not stop this healthy behavior when we retire. To calculate your monthly retirement paycheck, use one of the tactics described below which minimize the chance of ruin (outliving your money)."
Steve Vernon Live Long and Prosper, Invest in Happiness & Wealth for Retirement and Beyond (John Wiley, 2005)
Similar basic principles apply to many recipients of personal physical injury or sickness, workers compensation, or wrongful death settlements, or even the attorneys of such recipients with their attorney fees. We're not talking paycheck to paycheck as in "hand to mouth". What is being stated here is that lump sum settlement recipients may consume, or are tempted to consume an excessive amount of principal to the extent that they jeopardize their lifetime financial security. Steps can be taken up front via tax-free structured settlements, structured legal and attorney fees tax deferred income annuities, immediate annuities and other vehicles to protect such recipients.
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