You’ve Discovered A Little-Known Fixed Income Strategy That Savvy Institutional Investors Want To Keep To Themselves…
Frequently Asked Questions
Here Are A Few FAQs We Get A Lot
Why Do DCF Income Payments Have Higher Yield Than Fixed Annuities?
The yield on DCF Income Payments is higher simply because the seller of structured settlement payment rights is selling at a discount.
These are existing, fully funded payment obligations. A buyer becomes the assignee of an existing payment stream- a note receivable bought at a discount.
Why Would the Insurance Company Issue a Contract Yielding 6% In This Market?
Discounted cash flow is a hard concept for a lot of people, but it’s at the heart of this market. $100 in 10 years is worth $55 today at a 6% discount rate. There are 10 years of deferred, compounding accumulation, which means the purchase price today is just $55.
Using the same discount rate of 6%, a payment stream of $1000/ month for 120 months costs $90,724.32 today. Because the payments start immediately, each payment includes some portion of principal and some of interest. As principal is paid out, is no longer accruing at the discount rate, and thus the total amount of interest earned on a ten-year income stream is much lower than the total interest earned on a ten-year deferred lump sum contract.
Insurance companies are not issuing contracts that yields 6% in this marketplace. Rather, sellers are willing to sell their existing payment rights and in some cases their existing annuities at a discount that allows you to achieve a 6% yield.
In summary, investors considering period certain Single Premium Immediate Annuities (SPIA’s) or using withdrawals from Fixed Annuities, Variable Annuities, or Indexed Annuities for cash flow, will find a DCF Income Payment a higher yield alternative.
How Safe Are Structured Settlement Income Streams?
Very safe. DCF only buys streams funded by highly rated life insurance companies, partners with an FDIC member bank to manage all payments, engages expert legal counsel to perform due diligence on all assets, and sells after confirming all details.
Buying a structured settlement income stream is like buying any other investment.
How do DCF Income Payments fit into my financial plan?
DCF Income Payments are an excellent, high-yield alternative to other fixed income investments. In addition, they can also form a high-yield, guaranteed income source for risk-averse investors, or to fund future obligations.
Here’s an example scenario:
A couple has a wide disparity between their ages (60-year-old man, 50-year-old wife). Traditional joint life annuities will offer very low payouts for this couple.
However, DCF Income Payments can be used to produce income for any buyer, or buyers, and of any age. In this scenario, the couple may use Immediate Income DCF Payments to produce Income Now for a period of years, then use other tools to protect their money and produce income later, thus earning a higher yield than any other safe money option.
Who is the typical DCF Income Payment buyer?
The typical DCF Income Payment buyer is a safe-money investor seeking an above-average yield, with very low risk and no volatility. Payment streams can be immediate income, short-term lump sum, long-term lump sum, or a mixture.