When it comes to building a secure financial future, finding reliable, low-risk investments is a top priority—especially for the fixed income portion of your portfolio. One option that often flies under the radar for individual investors, but is widely utilized by banks and financial institutions, is assured annuities from injury and accidental death settlements. These structured settlement annuities offer a unique way to generate steady income without the risks associated with more volatile investments. Here’s why they could be a great addition to your portfolio.

What Are Structured Settlement Annuities?

Structured settlement annuities arise from legal settlements, such as those for personal injury or accidental death claims. Instead of receiving a lump-sum payout, the recipient opts for a series of payments over time. These payments are often facilitated through an annuity, typically backed by a highly rated insurance company.

Banks and financial institutions frequently purchase these annuities from the original recipients, who may prefer immediate cash over future payments. Once acquired, the annuity provides the buyer—whether an institution or an individual investor—with a guaranteed stream of income. This predictable cash flow makes them an appealing choice for anyone seeking stability in their portfolio.

A Virtually Risk-Free Investment

One of the standout features of structured settlement annuities is their low-risk profile. The payments are contractually guaranteed by the insurance company managing the annuity, meaning you’ll receive your money as long as the insurer remains financially sound. Since these insurers are often large, well-established firms with strong credit ratings, the likelihood of default is minimal.

Unlike stocks, which can plummet with market downturns, or even bonds, which can be affected by interest rate changes, these annuities deliver consistent payments regardless of economic conditions. For the fixed income portion of your portfolio—where safety and reliability are paramount—this lack of volatility is a major advantage.

Steady Income for Financial Security

If you’re looking for a dependable income stream, structured settlement annuities deliver. The payments are fixed and scheduled in advance, offering a level of predictability that’s hard to find in other investments. Whether you’re a retiree planning your monthly budget or an investor seeking to supplement your income, this consistency can provide peace of mind.

For example, imagine purchasing an annuity that pays you $1,500 every month for the next 15 years. That’s a reliable cash flow you can count on, making it easier to plan your finances without worrying about market fluctuations.

How They Fit Into Your Fixed Income Portfolio

The fixed income portion of a portfolio is designed to provide stability and reduce overall risk. Structured settlement annuities align perfectly with this goal. Compared to traditional fixed income options like bonds or certificates of deposit (CDs), they offer a unique edge:

• Bonds: While generally safe, bond prices can drop when interest rates rise, introducing some risk.

• CDs: These are low-risk, but their returns are often modest, and your money is locked away for a set term.

Structured settlement annuities, by contrast, provide a fixed payment stream that’s immune to market swings, offering both safety and reliability. They’re an ideal way to diversify your fixed income holdings with an asset that banks and financial institutions have long trusted.

Potential Tax Advantages

Another perk of these annuities is their potential tax efficiency. Payments from injury or accidental death settlements are often tax-free, especially if they’re compensation for physical harm. This can give them an edge over other fixed income investments, like bond interest, which is typically taxable. However, tax rules can vary, so it’s wise to consult a tax advisor to confirm how this applies to your specific annuity.

Key Considerations

While structured settlement annuities are a low-risk choice, they do come with some trade-offs. The biggest is their lack of liquidity: once you invest, you’re committed to the payment schedule, and accessing the principal early isn’t an option. This makes them best suited for investors who don’t need immediate access to their funds.

Additionally, the returns may not be as high as those from riskier investments like stocks. But for the fixed income portion of your portfolio, where the focus is on preservation and stability rather than growth, this trade-off is often a small price to pay.

How Can You Invest in Them?

Although banks and financial institutions are the primary buyers, individual investors can also purchase these annuities, typically through the secondary market. Specialized brokers or platforms connect buyers with sellers, though the process can be more involved than buying traditional securities. If you’re interested, partnering with a knowledgeable financial advisor or broker is a smart step to navigate the legal and regulatory requirements, such as court approvals often needed for these transactions.

Conclusion

Assured annuities from injury and accidental death settlements are a hidden gem for anyone looking to bolster their fixed income portfolio with a low-risk, reliable investment. Widely used by banks and financial institutions, they offer guaranteed payments, potential tax benefits, and unmatched stability—all without the uncertainty of market-driven assets. While they require a long-term commitment, their safety and predictability make them a standout choice for investors prioritizing security.

If you’re ready to add a rock-solid income stream to your portfolio, structured settlement annuities could be the perfect fit.