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Michael Gibbons
01-13-2008, 12:31 AM
How much does that guy scalp you for when he buys your annuities? Just wondering?? Anyone??

Mike Henderson
01-13-2008, 12:53 AM
I don't know but the "present value" must be discounted quite a bit to pay for all the advertising he does. I think he's after structured settlements and not real annuities (like a single life annuity).

For someone with a structured settlement, I would think a better approach would be to go to a bank and get a loan, using the structured settlement as collateral. That way, when you pay off the loan, you still have the payments from the structured settlement. If you sell the structured settlement (which is what J.G. wants you to do) it's gone forever.

Mike

Bob Childress
01-13-2008, 7:52 AM
Dunno, but I've always suspected 50 cents on the $$, maybe even less. :eek:

Chris Damm
01-13-2008, 7:55 AM
I looked into selling a land contract and I would get about 50% of the principle. This was about 25 years ago and the IPR was 11%. Not anywhere tempting to sell on my end.

David G Baker
01-13-2008, 10:10 AM
Michael,
I am no financial adviser but have done tons of financial research. I do not like annuities and will never invest in one. I have two pensions and they are annuities created by my employer, if I could get my hands on the full dollar amount I would take the money, even if I had to pay taxes on the money, and invest it in Vanguard Mutual Funds. I have no connection to or with Vanguard other than I have done very well investing in some of their funds.

John Shuk
01-13-2008, 10:56 AM
This may seem to be a broad statement but along with the Wentworth commercials on the radio are lots of other commercials touting get rich quick plans,"easy" credit offers, reverse mortgages, etc. The same type of companies who advertise on Jerry Springer and all the divorce court type shows. Judging by the company they keep..... Just my feeling on it.

Mike Henderson
01-13-2008, 1:04 PM
Michael,
I am no financial adviser but have done tons of financial research. I do not like annuities and will never invest in one. I have two pensions and they are annuities created by my employer, if I could get my hands on the full dollar amount I would take the money, even if I had to pay taxes on the money, and invest it in Vanguard Mutual Funds. I have no connection to or with Vanguard other than I have done very well investing in some of their funds.
It's true that someone (you) might be able to do better with the money that was used to purchase an annuity - after all, the insurance company who provides the annuity assumes that they can do better with the money than the imputed interest rate they give on the annuity.

There are a couple of issues, however.

The first is assumption of risk. The stock market might fall off the cliff or the person investing the money might make bad investment decisions. When that happens, the full weight of the mistake falls on the individual. An insurance company (if it's doing the right things) hedges its risk and limits how much it invest in high risk investments. It also has to have a significant capital reserve (by regulation) to withstand adverse events.

Also, for retirement funds, the person must manage that money (the payouts) so that the money lasts for his/her lifetime. The problem is: "What is an individual's lifetime?" On an individual basis that cannot be answered but when enough people are aggregated it can be answered quite accurately. For self management, the individual will either run out of money before they die, or will leave money that could have been used during their lifetime.

The next is that many structured settlements are set up by the courts (rather than a lump sum payout) because the person receiving the settlement is viewed as a poor risk for managing a lump sum. For example, a young child is injured due to medical malpractice and will require special care for the rest of his/her life. The parents have shown themselves to be unsophisticated in handling money - or maybe worse, to have demonstrated themselves to be poor managers of money (binge spending, drug addiction, etc.). By structuring the payouts of the settlement, the court hopes that the payments will still be around to help the child when s/he reaches majority.

J.G. would purchase that structured settlement, allowing the parents to possibly dissipate the principle, leaving nothing for the child, who would then become a ward of the state when the parents run out of money.

Mike

David G Baker
01-13-2008, 1:56 PM
Mike,
I invested in what is called "The Coffee House Portfolio" as described by CBS financial on line site. The portfolio has 7 funds in it that pretty well covers most options. The funds are within one IRA and I balance the portfolio a couple of times a year but it is essentially a lazy man's type of portfolio that can pretty well be left alone and a novice can do well with it. The earnings are tax deferred until I take money out. The portfolio has done quite well by me so far but I do know that there is risk in any investment but diversified as the funds are I feel reasonably safe. Any investment is only as safe as the company that is holding a persons funds.
I think the funds are mentioned in Motley Fool's site as well. ( great source of information on investing)

Michael Gibbons
01-13-2008, 2:08 PM
I'm not a fiancial guru so I was assuming that what he was talking about is something on the line of a lawsuit settlement or lottery winnings paid over time and he would buy yours at a reduced rate and you could get all or part of your money all at once. So if you win the Big Ball and your payments over time would be lets say $250,000.00 a year, how much would you get if J.G. got involved?

Bob Childress
01-13-2008, 2:23 PM
I'm not a fiancial guru so I was assuming that what he was talking about is something on the line of a lawsuit settlement or lottery winnings paid over time and he would buy yours at a reduced rate and you could get all or part of your money all at once. So if you win the Big Ball and your payments over time would be lets say $250,000.00 a year, how much would you get if J.G. got involved?

Here's a better example: You are injured and you use a personal injury attorney who takes your case on a contingency basis. You pay nothing up front, but you pay him/her 30-35% (or sometimes more) if he wins. Okay, you win. You get a million $$. Where does it go?

The attorney get his 35%, so you get $650,000. As Michael says, you're a bad risk, so you get your 650,000 paid out over 20 years at $32,500 a year. But, as the ad says, "It's my money and I want it now." Fine, says JG Wentworth, we'll give you $325,000 for your $650,000 pay out, You say okay.

Now, your $1 million is down to $325,000. But, since you took a lump sum from Wentworth,you owe taxes at a high rate (I forget the max rate, but let's say 35%). So, after taxes you have $211,250. Your $1 million has turned into about 20% of the original total and everybody but you has made plenty of money. :(

Mike Henderson
01-13-2008, 3:12 PM
I'm afraid that things are even worse than Bob Childress points out. When you have the right to a series of payments over time, that series of payments has a "Present Value" which is not equal to the sum of the payments - it's worth a lot less. So in his example, you'll get a total of $650,000 over 20 years. Nobody is going to give you $650,000 today for that series of payments. The amount they'll give you is the "present value" of that stream of payments. At 6% interest, the present value of that stream of payments is $372,772 (rounded). J.G. will probalby offer you about half of that, or about $186,000. You pay 35% tax on the lump sum and you have about $121,000 or about 12% of your original judgement.

[added stuff] While J.G. can just sit back and collect the payments, he's after income today and not a stream of earnings. Some structured settlements are for the life of the individual so J.G. is taking a risk. If you die the day after he buys your structured settlement, he doesn't get any money. If you die one year after he buys your settlement, he only gets one year of payments. If the structured settlement survives the individual, he doesn't have that risk.

So my guess is that after he buys your structured settlement for maybe 50% of it's present value, or even less than 50%, he goes to the company paying the settlement and offers to settle with them for 75% of the present value. That way, he gets money today, he doesn't take the risk of you dying too soon, and the company paying the settlement gets out of the settlement for less than they expect to pay you.

Mike

John Shuk
01-13-2008, 7:41 PM
I was watching the show "The Curse of the Lottery". There was some mention of a company buying about $10 or $12 million in future payments for about $2 million. The guy blew through that just like he did the money he got before that and was way broke.

Rick Gifford
01-13-2008, 10:56 PM
I'm afraid that things are even worse than Bob Childress points out. When you have the right to a series of payments over time, that series of payments has a "Present Value" which is not equal to the sum of the payments - it's worth a lot less. So in his example, you'll get a total of $650,000 over 20 years. Nobody is going to give you $650,000 today for that series of payments. The amount they'll give you is the "present value" of that stream of payments. At 6% interest, the present value of that stream of payments is $372,772 (rounded). J.G. will probalby offer you about half of that, or about $186,000. You pay 35% tax on the lump sum and you have about $121,000 or about 12% of your original judgement.

[added stuff] While J.G. can just sit back and collect the payments, he's after income today and not a stream of earnings. Some structured settlements are for the life of the individual so J.G. is taking a risk. If you die the day after he buys your structured settlement, he doesn't get any money. If you die one year after he buys your settlement, he only gets one year of payments. If the structured settlement survives the individual, he doesn't have that risk.

So my guess is that after he buys your structured settlement for maybe 50% of it's present value, or even less than 50%, he goes to the company paying the settlement and offers to settle with them for 75% of the present value. That way, he gets money today, he doesn't take the risk of you dying too soon, and the company paying the settlement gets out of the settlement for less than they expect to pay you.

Mike

If I had to bet a dollar, that's the layout I'd guess too.

It would be real interesting to know the inside scoop and exactly how much is made on those deals.

Rick Gibson
01-13-2008, 10:58 PM
I'll stay in Canada, no taxes on lottery or gambling winnings. Then again I don't buy lottery tickets or gamble so I guess it doesn't matter.

Bob Childress
01-14-2008, 6:25 AM
I'm afraid that things are even worse than Bob Childress points out. When you have the right to a series of payments over time, that series of payments has a "Present Value" which is not equal to the sum of the payments - it's worth a lot less. So in his example, you'll get a total of $650,000 over 20 years. Nobody is going to give you $650,000 today for that series of payments. The amount they'll give you is the "present value" of that stream of payments. At 6% interest, the present value of that stream of payments is $372,772 (rounded). J.G. will probalby offer you about half of that, or about $186,000. You pay 35% tax on the lump sum and you have about $121,000 or about 12% of your original judgement.Mike

Quite right, Mike. I forgot to allow for NPV in my calculations. Worse and worse. :eek:

Cliff Rohrabacher
01-14-2008, 3:20 PM
Think long and hard before you transact with any of those companies. They litigate often and early.

Michael Gibbons
01-15-2008, 7:30 AM
Honest, I'm just wondering. I'm broker than a family on Little House on the Prarie.

Cliff Rohrabacher
01-15-2008, 9:27 AM
Well you might want to weigh the loss of about 30% - 40% of the total sum against your ability to wait and look to alternatives.

I don't recall reading what it is that you have whether it's an award of damages from a litigation or an inheritance trust or an annuity or a lottery or what - or the sum but, all those companies like to take a fair sum as their cream and they like to take in the manner of their choosing. I would advise against doing business with any of them unless you went with a lawyer at your side.

And then of course there are all the other options that may or not be available to solve for money issues. Some folks are in the rust belt and often their best most realistic option is to take work elsewhere in the country and maybe even re-train for something else entirely.

Just make sure you have exhausted all the options first. It's a lot of money they will take from you.

AND you need to be aware of the Tax burden you'll pay. Will you pay taxes on all of it? I think you might. I'm not a tax attorney or a CPA so, you need to find out from a tax expert.

Mike Henderson
01-15-2008, 10:05 AM
Honest, I'm just wondering. I'm broker than a family on Little House on the Prarie.
Cliff gives some good advice. Before you go to JG, go to a bank and see if you can get a loan using your annuity or structured settlement as collateral. That way, the discount (in the present value) you take will be equal to the loan interest rate rather than the significant discount JG will take.

JG preys on people who are desperate. Also, if there are any problems, you won't stand much of a chance against JG. You'll have to pay an attorney to fight him, while he'll be handling the fight as part of his normal workday.

Another approach is to sell the annuity to an investor. You'll need help here so go to a financial advisor. They'll take their cut but it will be less than JG's. If the annuity is rock solid (very little risk of default) someone will buy it for its present value calculated at a 12% to 15% interest rate. If you don't understand present value, get a friend who does to help you approach a financial advisor.

Mike