Sell Your Annuity? How do you get?

We all know that television advertising for your offers to buy structured settlements, lottery winnings, guides, or refer. The question is, how do you get? Well, the answer is not simple, but here are some factors to consider when determining the value of the pension.

The most important thing to consider is how long the receipt of payments. The more time a cover flow of payments, the less it is worth in dollars today. For example, if youWill receive $ 500,000 in 20 years, which is more valuable than getting the same $ 500,000 over 30 years. Why, because the value of money over time.

The time value of money, says essentially that a dollar today is worth more than a dollar tomorrow, so obviously that is collected $ 500,000 over 20 years, is worth more than U.S. $ 500,000 over 30 years of collection. You can imagine that, from the perspective buyers.

If you invested $ 50,000 at 12%, your money will tend to double every 6 Years. After 12 years of composition, it is $ 200,000. But what happens if only 6%? Because in this way, doubling your money every 12 years, it takes 24 years for 200,000 $ in connection. Worth more? Of course, the United States received $ 200,000 in just 12 years is worth more than 24 years, because there is no need to wait that long.

The second thing to consider is the current interest rate for long-term bonds - which is a link with about the same time, or life, such as your> Pension. You can expect your data stream for the payment of having a lump sum present value at a rate close to this discount. This is because the investor is next best alternative for a similar investment. What is meant by discounting your cash flow?

If a stream of payments over a given period is granted, is essentially the equivalent in dollars of today. In other words, how much money you should invest today, a) (discount rate, to have the same amountMoney of all payments are added to the end of retirement? This is the amount that the investor is willing to pay for your income stream for the return they want to earn.

The discount rate, the investor may use higher or lower than market rate - it all depends on what return is required by the investor and how risky the annuity.

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