You are never too young or too old when it comes to knowing if an annuity is right for you. Thinking about purchasing an annuity as an investment vehicle? Perhaps you are in the process of settling a lawsuit and have been presented with a structured settlement annuity. Then here is some important information to help you if you are considering one of these products.

What is an Annuity?
An annuity is a financial contract or insurance product purchased from an insurance company that will pay you at regular intervals over time in exchange for the lump sum or premium that you used to buy the policy. The regular intervals from the annuity can be paid to you monthly, in lump sums, for as long as you are alive or a combination of all three.

What is a Structured Settlement?
A structured settlement is a financial arrangement that allows court-awarded compensation to be paid in regular installments rather than in one lump sum. Typically these payments provide money for a fixed period or lifetime through an annuity purchased by the plaintiff or their insurance company. Every structured settlement is tailor-made and may also include some money upfront. Used in settling personal injury or malpractice suits, structured settlements terms vary. The payments are considered tax-free under the Internal Revenue Code.

Is an Annuity or Structured Settlement Right for You?
First and foremost the annuity should be part of an overall financial picture. When purchasing an annuity, you should take into account your level of risk and how much money you are comfortable allocating when buying the annuity.

If you are a Senior or Generation Xer then a retirement plan should be on the horizon. The sooner you start saving for retirement, the more time your investment will have to grow toward your goals. Someone belonging to Generation Y will want to start planning for the purchase of a house, car, and college funds for their kids, as well as retirement. Most structured settlement recipients will want the money to fund their education or their kids, to replace income that was lost as a result of their personal injury, or to provide guaranteed long term income.

In determining whether the annuity is right for you ask yourself the following questions:
How much money will you need in addition to what government benefits or pensions you are entitled to?
Are you supporting yourself or will you be supporting others in addition?
What type of lifestyle are you trying to maintain or achieve?
Does the annuity allow you to withdraw from it if you need the money now?
What will be the penalty if you do withdraw early?
Are there any provisions that prohibit you from selling the annuity to a third party?
What is the interest rate and for how long is it guaranteed?
What happens to the annuity if you die? Who will your beneficiary be?

Know before you Sign
With any financial decision or the purchase of an insurance product, always review the contract or purchase agreement carefully before you sign. Be sure you understand the terms and conditions. Ask the agent and/or company to explain what you dont understand. Dont be afraid to have it reviewed with another agent or attorney. Obtain multiple quotes or offers to ensure you are receiving the most for your money.

About the Author:
John Zepeda is the Vice President of Sales and Business Development for Rescue Capital a specialty finance company specializing in the purchasing of structured settlement or annuity payments. He has over 7 years of specialty finance experience developing wholesale initiatives as well as secondary markets for the sale of illiquid assets including structured settlements and annuities.