Suze Orman is against selling structured settlement annuities to cover high debt. Orman warns that cashing out a settlement often reaps much lower financial rewards, because companies buying settlements tend to underpay compared to their value. Orman recommends putting annuity payments into an individual retirement account that pays interest.
Suze Orman suggests that individuals receiving structured settlement annuities turn to debt counseling services to resolve pressing financial problems instead of cashing out the settlement for a lump sum. Individuals can get help from organizations such as the National Foundation for Credit Counseling, which provides assistance with debt payment plans. Debt counselors also give advice about using structured settlements for debt resolution. Orman views lump sum payments as inadequate for resolving debt, and cash payments often don't cover the entire debt owed. A better use of annuity money is to invest the entire monthly payment into an interest-bearing IRA that offers a five percent or more annual return on investment.
Financial settlements are usually set up as annuity payments to protect plaintiffs from spending a lump sum of money too quickly. It's important for structured settlements to have good financial management to ensure funds are available over the long term. Individuals should consider the tax advantages of maintaining monthly payments. State and federal taxes applied to a large lump sum further reduce its value.