Structured Settlement Calculator
Calculate the present value of structured settlement payments and compare lump sum vs annuity options.
Payment Details
Settlement Type
Cost of Living Adjustment (COLA)
Lump Sum Buyout Comparison
Present Value of Payments
$348,952
Payment Schedule
| # | Date | Payment | Present Value | Cumulative PV |
|---|---|---|---|---|
| 1 | Feb 2026 | $2,500 | $2,488 | $2,488 |
| 2 | Mar 2026 | $2,500 | $2,475 | $4,963 |
| 3 | Apr 2026 | $2,500 | $2,463 | $7,426 |
| 4 | May 2026 | $2,500 | $2,451 | $9,876 |
| 5 | Jun 2026 | $2,500 | $2,438 | $12,315 |
| 6 | Jul 2026 | $2,500 | $2,426 | $14,741 |
| 7 | Aug 2026 | $2,500 | $2,414 | $17,155 |
| 8 | Sep 2026 | $2,500 | $2,402 | $19,557 |
| 9 | Oct 2026 | $2,500 | $2,390 | $21,948 |
| 10 | Nov 2026 | $2,500 | $2,378 | $24,326 |
| 11 | Dec 2026 | $2,500 | $2,367 | $26,693 |
| 12 | Jan 2027 | $2,500 | $2,355 | $29,047 |
| 13 | Feb 2027 | $2,500 | $2,343 | $31,390 |
| 14 | Mar 2027 | $2,500 | $2,331 | $33,722 |
| 15 | Apr 2027 | $2,500 | $2,320 | $36,042 |
| 16 | May 2027 | $2,500 | $2,308 | $38,350 |
| 17 | Jun 2027 | $2,500 | $2,297 | $40,647 |
| 18 | Jul 2027 | $2,500 | $2,285 | $42,932 |
| 19 | Aug 2027 | $2,500 | $2,274 | $45,206 |
| 20 | Sep 2027 | $2,500 | $2,263 | $47,469 |
| 21 | Oct 2027 | $2,500 | $2,251 | $49,720 |
| 22 | Nov 2027 | $2,500 | $2,240 | $51,960 |
| 23 | Dec 2027 | $2,500 | $2,229 | $54,189 |
| 24 | Jan 2028 | $2,500 | $2,218 | $56,407 |
Showing first 24 of 240 payments
Understanding Your Results
Present Value ($348,952) represents what your future payments are worth in today's dollars. This is calculated using a 6% discount rate.
Total Payments ($600,000) is the sum of all 240 payments you will receive over 20 years.
Time Value Discount ($251,048) reflects how much value is lost due to receiving payments over time rather than as a lump sum today.
Important Disclaimer
This calculator provides estimates only for educational purposes. Actual structured settlement values depend on many factors including specific contract terms, the insurance company involved, current market conditions, and legal requirements. Selling a structured settlement requires court approval in most states. Always consult with a qualified financial advisor and attorney before making any decisions about your settlement.
Important Considerations
- •Structured settlement buyers typically offer 60-80% of present value due to their profit margins and risk
- •Court approval is required in most states to sell structured settlement payments
- •Consider selling only a portion of your payments rather than the entire settlement
- •Get multiple quotes from different buyers to ensure you receive a competitive offer
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About This Calculator
A structured settlement converts a lump sum award into a series of guaranteed, tax-free payments over time. Whether you are evaluating a settlement offer, considering selling your structured settlement, or planning your financial future, understanding the present value and payment structure is essential.
Why Structured Settlements Exist: After personal injury lawsuits, many plaintiffs struggle to manage large lump sums. Studies show that 90% of lottery winners and lump sum recipients deplete their funds within 5 years. Structured settlements provide financial security by spreading payments over time while preserving the tax-free status of personal injury awards.
The Present Value Concept: A structured settlement offering $1 million paid over 20 years is not worth $1 million today. Due to the time value of money, those future payments have a present value that is significantly less. This calculator helps you understand what your structured settlement is actually worth in today`s dollars.
Key Features of Structured Settlements:
- All payments are 100% tax-free (personal injury)
- Payments are guaranteed by highly-rated insurance companies
- Flexible payment schedules (monthly, annual, lump sums)
- Cannot be modified once established
- Protected from creditors in most states
For evaluating lump sum settlements, visit our Lawsuit Settlement Calculator. To understand retirement income options, see our Annuity Calculator.
How to Use the Structured Settlement Calculator
- 1Enter the total nominal value of your structured settlement (sum of all payments).
- 2Input the periodic payment amount you will receive (monthly, annually, etc.).
- 3Select the payment frequency (monthly, quarterly, annually, or lump sum).
- 4Enter the number of years payments will continue.
- 5Input a discount rate to calculate present value (4-8% is typical).
- 6Add any scheduled payment increases or future lump sums if applicable.
- 7Review the present value, total payments, and payment schedule breakdown.
Understanding Present Value of Structured Settlements
The present value (PV) of a structured settlement answers: "What is this stream of future payments worth today?"
The Time Value of Money
$1,000 received today is worth more than $1,000 received in 10 years because:
- Today`s dollar can be invested and grow
- Inflation reduces purchasing power over time
- There is uncertainty in receiving future payments
Present Value Examples
| Future Payment | Years | Discount Rate | Present Value |
|---|---|---|---|
| $10,000 | 5 | 5% | $7,835 |
| $10,000 | 10 | 5% | $6,139 |
| $10,000 | 20 | 5% | $3,769 |
| $10,000 | 30 | 5% | $2,314 |
Discount Rate Selection
| Rate | When to Use |
|---|---|
| 3-4% | Conservative, similar to Treasury bonds |
| 5-6% | Moderate, typical structured settlement rate |
| 7-8% | Aggressive, reflects higher investment returns |
| 9-12% | Used by buyers when purchasing settlements |
The higher the discount rate, the lower the present value.
Structured Settlement Payment Options
Structured settlements offer tremendous flexibility in payment design.
Common Payment Structures
Level Payments
- Same amount every period
- Simplest to understand and budget
- Example: $3,000/month for 20 years
Increasing Payments
- Payments grow over time (2-4% annually)
- Helps offset inflation
- Example: $2,500/month, increasing 3% per year
Lump Sum Payments
- Periodic large payments for specific needs
- College funding, home purchase, etc.
- Example: $50,000 every 5 years
Deferred Payments
- Start at a future date
- Retirement funding, delayed needs
- Example: $4,000/month starting at age 65
Life Contingent vs. Period Certain
| Type | How It Works | Pros | Cons |
|---|---|---|---|
| Life Contingent | Payments for your lifetime | Potentially longest payout | Stops at death |
| Period Certain | Payments for set years | Guaranteed to heirs | May outlive payments |
| Life with Period Certain | Both protections | Best security | Lower payment amounts |
Tax Benefits of Structured Settlements
Structured settlements offer significant tax advantages that lump sums cannot match.
100% Tax-Free Growth
Under IRC Section 104(a)(2):
- All payments from personal physical injury settlements are tax-free
- The growth/interest component is also tax-free
- No taxes ever, regardless of how much you receive
Tax-Free vs. Taxable Investment Comparison
| Investment Type | $500,000 Invested | After 20 Years (6%) | After Taxes |
|---|---|---|---|
| Structured Settlement | Tax-free annuity | ~$1,600,000 | $1,600,000 |
| Taxable Investment | Stocks/bonds | ~$1,600,000 | ~$1,200,000 |
What Qualifies for Tax-Free Treatment
Tax-Free:
- Physical injury damages
- Physical sickness damages
- Workers compensation
- Wrongful death (survivor portions)
Taxable:
- Punitive damages (always)
- Employment discrimination (mostly)
- Emotional distress without physical injury
Selling Your Structured Settlement
If you need cash now, you can sell some or all of your future payments to a factoring company.
How Settlement Sales Work
- You agree to sell future payments
- Buyer pays you a lump sum now
- Buyer receives your future payments
- Court must approve the sale
Typical Discount Rates When Selling
| Payment Timing | Typical Discount Rate | You Receive |
|---|---|---|
| Next 5 years | 9-12% | 60-75% of value |
| 5-10 years out | 12-15% | 50-65% of value |
| 10-20 years out | 15-18% | 35-50% of value |
| 20+ years out | 18-25% | 20-35% of value |
When Selling Makes Sense
Consider Selling If:
- Medical emergency requiring immediate funds
- Opportunity to pay off high-interest debt
- Preventing foreclosure or bankruptcy
Avoid Selling If:
- For discretionary purchases
- To fund risky investments
- When other financing is available
Structured Settlement vs. Lump Sum
Choosing between a structured settlement and lump sum is one of the most important financial decisions you will make.
Comparison Table
| Factor | Structured Settlement | Lump Sum |
|---|---|---|
| Tax Treatment | 100% tax-free | Tax-free principal, taxable growth |
| Access to Funds | Restricted | Immediate |
| Investment Risk | None (guaranteed) | Market dependent |
| Protection from Self | High | None |
| Creditor Protection | Usually protected | Varies by state |
Who Should Choose Structured
- Those with poor money management history
- Individuals needing guaranteed income
- Parents protecting children`s funds
- Those wanting creditor protection
Who Should Choose Lump Sum
- Experienced investors
- Those with immediate large expenses
- Individuals with short life expectancy
- People with strong financial discipline
The Hybrid Approach
Many settlements use both:
- Lump sum: $100,000 for immediate needs
- Structured: $3,000/month for 20 years
- Future lump: $50,000 for college in 10 years
Structured Settlement Insurance and Safety
Structured settlements are backed by some of the strongest financial guarantees available.
How Settlements Are Funded
- Defendant purchases annuity from life insurance company
- Annuity is assigned to a qualified assignee
- Assignee owns the annuity and makes payments to you
- Defendant is released from future liability
Insurance Company Ratings
Only highly-rated companies typically fund settlements:
| Rating | Meaning | Safety |
|---|---|---|
| AAA/Aaa | Highest quality | Extremely safe |
| AA/Aa | Very high quality | Very safe |
| A | High quality | Safe |
| BBB/Baa | Adequate | Acceptable |
State Guaranty Associations
If an insurance company fails:
- State guaranty associations provide backup
- Coverage typically $100,000-$500,000
- Varies by state
Historical Safety Record
- No major structured settlement insurer has failed
- Even during 2008 financial crisis, payments continued
- Diversification among insurers is recommended for large settlements
Pro Tips
- 💡Get multiple quotes from different insurance companies before finalizing your structured settlement.
- 💡Consider including inflation increases (2-3% annually) to maintain purchasing power.
- 💡Build in lump sum payments for anticipated future needs like college or home purchase.
- 💡Choose life with period certain to protect both yourself and your beneficiaries.
- 💡Split large settlements among multiple insurance companies for added security.
- 💡Verify the insurance company rating is A or better before accepting.
- 💡Work with an independent structured settlement consultant, not just your attorney.
- 💡Consider your tax bracket when comparing structured vs. lump sum options.
- 💡Document all settlement terms and keep copies in multiple secure locations.
- 💡Avoid selling your structured settlement unless absolutely necessary.
- 💡If you must sell, get quotes from at least 3-5 factoring companies.
- 💡Have a financial planner review your settlement structure before finalizing.
Frequently Asked Questions
Present value depends on your payment amount, duration, and the discount rate used. For example, $50,000 annual payments for 20 years has a present value of about $623,000 at a 5% discount rate. Use this calculator to determine your specific present value based on your payment terms.
