For investors in the last few years before retirement, safety is the #1 priority. Whether you need your assets to produce Income Now, Income Later, or you need them to work for you and Grow Safely, preservation of your assets and protection from loss is critical.
Safe money options like Treasuries and CDs offer dismal yields.
In fact, yields are so low that staying in CDs ensures you are just losing money, safely, every day. Inflation is running far higher than CD yields, so your purchasing power is declining with each day you’re NOT invested.
Certificates of Depression more like it.
But there is a higher yield, little-known alternative in the safe money investment world known as a DCF Income Payment. If you are seeking a higher yield, safe and secure alternative fixed asset, then these payment streams may be just the ticket.
ORIGINS OF SECONDARY MARKET PAYMENTS
Structured settlements are typically a series of payments awarded to an individual in settlement of a personal injury case. When the winning party in a case elects to receive their funds over time, money is paid by the losing party into a ‘qualified settlement fund’ or directly to an insurance company. An annuity is purchased to provide the specific payments agreed upon by the parties.
The liability for the future payments that make up the compensation due under the settlement agreement is backed by an annuity. Therefore, the insurance company that issued the annuity is effectively a party to the case, and legally bound to make a fixed series of future payments.
Now, we all know that times change. Even the most carefully crafted settlement plans that seek to anticipate all the future financial needs sometimes fall short. In 10 to 15% of structured settlement situations, at some point people with future payments need to sell some or all of their future payments for cash today.
This is what we call a secondary market transaction…
Secondary market payment streams are receivables backed by annuities. Lets be clear- buyers of these payments are NOT buying the underlying annuity. Instead, buyers acquire the right to receive fixed and scheduled payments from structured settlements backed by annuities issued by top-rated insurance companies. These payment rights are transferred in a court-administered and IRS compliant process, but the annuity itself does not change hands.
The underlying annuities themselves cannot be surrendered or cashed into the carriers directly. Therefore, this court ordered transfer process is the only path to liquidity for sellers, and the discount they take to get cash today translates into a higher yield for you.
UNDERSTAND THE TERM SECONDARY MARKET ANNUITY
The term ‘Secondary Market Annuity’ can encompass several types of transferred receivables. It’s the most accurate term to use when dealing with the transfer of actual annuity contracts from insurance carriers, such as a SPIA and other self-owned annuity, or even periodic payment streams from lottery payments.
When speaking of structured settlements however, the term ‘secondary market annuity’ should not imply that someone is buying a new annuity directly from a carrier. What is transacting in a ‘secondary market’ transaction is the right to receive payments due under a structured settlement backed by an annuity. Other terms in the marketplace are ‘DCF Income Payments’, ‘Factored Structured Settlement’ or ‘Previously Owned Annuity’ or even ‘In Force Annuity’. Here’s a more in-depth discussion to help you understand the term ‘secondary market annuity’.
To be technically correct, ‘secondary market annuity’ is not the best term for a court ordered transfer of structured settlement payments as the underlying annuity contract does not change hands. What does transact, however, is the right to receive existing and in-force payments backed by annuities issued in conjunction with structured settlements. This is a nuanced distinction but as it represents the majority of the payments we offer, we take the cautious approach and prefer the term ‘DCF Income Payments’ in an effort to avoid any consumer misconception.
It’s also important to clarify that payments we sell are not viatical transactions. That is, they are not life insurance transactions or re-sold variable annuities with death benefits tied to another party’s life.
Rather, the most common DCF Income Payment transaction is much like a period certain multi-year guaranteed fixed annuity. But unlike newly issued annuities with yields in the 1- 2% range, these secondary contracts come with effective rates of 4% to 5% or more from top-rated carriers.
WHAT CARRIERS BACK THESE PAYMENTS?
High-quality companies like Berkshire, Met Life, Travelers, Symetra, Prudential, and John Hancock are the carriers who take in the premium in structured settlement cases. They have rock solid credit ratings and long operating histories. These are the financial partners you want on your side as they are well positioned to make payments 10, 20, 30+ years in the future.
WHO ARE IDEAL CANDIDATES FOR DCF PAYMENTS?
DCF Income Payments are perfect for investors who are sick and tired of stock market fluctuations … Who want safety and security…. and who want a higher yield that comparable new issue annuities …. And investors who want certainty in their financial future.
Investors considering index annuities and index annuities with lifetime income riders are great candidates for secondary market DCF Payments instead. Here’s why:
Hybrid income annuities have many benefits, especially lifetime income riders and partial market participation. But the low payouts, complicated terms, and sometimes low credit quality of many ‘hybrid annuity’ carriers make the high yield fixed secondary market annuity deals more attractive.
Other Users of DCF Income Payments
Secondary market DCF Income Payments are great for safety-conscious investors seeking a safe investment with a fixed series of payments that handily beats today’s rates and inflation.
If you’re currently in CDs, cash, and bonds, and not happy with the yields yet not willing to shoulder risk, then a DCF Income Payment is a great option to consider.
If you’re looking for a safe income you can depend on, there’s currently no higher yielding way to lock in long-term appreciation than with a DCF Income Payment.
And when you look at long-term rates of return in the stock markets, DCF Income Payments are extremely competitive and yet they completely remove all volatility and risk of loss.
WHO OFFERS DCF INCOME PAYMENTS FOR SALE?
DCFAnnuities.com is a market leader in connecting retail investors with DCF Income Payments. In addition, the owner of DCFAnnuities.com is also the President of DCF Exchange, a wholesale trading firm serving advisers around the country.
DCF Exchange buys payment streams from diverse origination sources in a strictly regulated and court-ordered transfer process. DCF processes and reviews every case to produce the highest quality income streams for clients, at a high yield unavailable from other fixed income sources. DCF manages the court-ordered transfer process and that makes you the new payee of an existing payment stream.
You gain a rock-solid payment stream, but win with a discounted purchase price, saving thousands of dollars over traditional fixed-income alternatives.
Compare Secondary Market Annuities
Take a moment to compare DCF Income Payments to other safe investments in the marketplace like CD’s, Treasuries, Cash, etc.
Compare to CDs:
CDs are affectionately known as “Certificates of Disappointment” these days. Yields are so low that you are likely losing ground to inflation. A CD is a place to store cash for a short term- it is NOT an investment in this marketplace.
If you’re in a 5 year CD paying 2%, you should look into a 5-year short term lump sum DCF Income Payments, whose rates are over 4%. Now, rates move with markets, so these are subject to change, but….
The comparison is clear- DCF Income Payments pay more and cost less.
Compare to Period Certain Immediate Annuities:
Period certain immediate annuities are simply fixed term fixed payout contracts, such as 20-year payment. You purchase a defined income stream from an insurance company, and they hold all the investment risk and must make the payout no matter what.
Period certain annuities are what defendants ultimately purchase to fund structured settlements. With a DCF Income Payment , you’re simply buying a period certain annuity, but at a discount.
At current market rates, 20-year period certain annuities reflect an approximately 2% effective rate of return.
With DCF Income Payments, a 20-year immediate income stream would have an effective rate of return between 4.25% and 5.25% depending on the deal and the situation.
The comparison is clear- A DCF Income Payment pays more and costs less.
Compare to Bonds and Treasuries:
Bonds, including muni bonds, corporate bonds, and Treasuries, all carry one critical and terminal risk- loss of principal. As interest rates fall, bond prices go up…… and when rates rise, prices fall.
When buying a bond you are buying the yield. But if you need to liquidate the bonds and the rates have risen, your principal value has diminished greatly. You lose money.
Many people don’t really ‘get it’ when it comes to bonds- they think it’s safe, when really, it’s not.
Instead, consider a high yield fixed investment in a DCF Income Payment. These payments offer excellent yields and fixed terms.
The comparison is clear- A DCF Income Payment offers a higher yield, without the risk of principal loss.
What other options are there?
Certainly not bonds! According to a March 22’nd Wall Street Journal Article titled “What Does the Prudent Investor Do Now?”, by Burton Malkiel,
“…Bonds are the worst asset class for investors. Usually thought of as the safest of investments, they are anything but safe today. At a yield of 2.25%, the 10-year U.S. Treasury note is a sure loser.
Even if the overall inflation rate is only 2.25% over the next decade, an investor who holds a 10-year Treasury until maturity will realize a zero real (after-inflation) return. If the investor sells prior to maturity, it will likely be for less than the face value of the note if the inflation rate rises…”
So bonds are no good, and there is even less yield in CD’s-
The Wall St Journal article continues,
“A good way to estimate the likely long-run rate of return from common stocks is to add today’s dividend yield (around 2%) to the long-run growth of nominal corporate earnings (around 5%). This calculation would suggest that long-run equity returns will be about 7%—five percentage points more than the safest bonds.”
So in other words, hold on for a wild ride up and down in the equity markets, with risk of Total loss… for about a 7% yield.
That does not sound like a worthwhile reward for the risk to me…
Given low rates on CD’s, low rates plus price risk on bonds, choppy equity markets, and low long-term equity yields, there aren’t a lot of options.
Frequently Asked Questions about DCF Income Payments
When compared to dismal bond yields and volatile equity markets, DCF Income Payments are a dream come true.
We offer AA rated insurance carriers making payments like clockwork, and you can get in at yields of 4% to 6% depending on the term of the payments.
When comparing secondary market DCF Income Payments to other investments with far less safety, this return is fantastic.