Reason #5
to Keep Your Settlement is if your payments extend too far into the future. This has to do with what is called the “time value of money”. This means that money is worth more today than it will be in the future – it’s due to inflation.
Imagine it, ten years ago a movie theater ticket cost about 40% less than it does now. Ten years ago think about what you could have bought with a dollar compared to today. Now, imagine that you put a dollar in a time capsule today and then opened it in ten years – how much do you think you could buy with that dollar today compared to ten years from now? A lot less.
This means that your payment will buy less in the future than it will now. So, if a company offers you a cash payout on structured settlement payments they will pay less for payments that extend further into the future, knowing that those payments will have less buying power. So selling payments that extend too far into the future is often a poor financial move as they will be heavily discounted, more so than simple inflation can account for. Like taking a cash advance on your credit card, you simply push your financial problems into the future, at a high cost.