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A Good Thing

A Good Thing

Over the past few months I have been writing about the potential pratfalls you face trying to predict mortality for the purposes of planning claim settlements and planning for retirement. They almost seem at opposites: on the one hand, when making retirement plans, you must plan on living a long time; on the other, it may be foolish to expect an injured claimant to do so.

Last month we discussed the risks people face in retirement planning and how a structured settlement can help give retirees a second chance. Some people have since told me that such sensible planning is all well and good but how do you convince a person to actually wait that long for their money? Fair question. The phone call I got the Friday before the Labor Day may be all the answer anyone would ever need.

On January 10, 1993, a 29-year-old man living in Garden City New York settled a personal injury case for $ 255,000. Mr. Richards (fictitious name) took $ 205,000 in up front cash to pay his attorney fees and expenses and to pay off some bills related the recent birth of his new baby girl.

Unlike many people his age, Mr. Richards was concerned about his – and his daughter’s -financial future. He worked for a steel company and knew that his back would not hold out fully through his 62nd birthday and so he wanted to create a supplemental retirement income to help bridge the gap. Working for a steel company and coming off a serious injury may focus a person more acutely on long term financial security. Mr. Richards split the remaining $ 50,000 of his settlement between an education fund for his daughter and a retirement fund for himself. The plan looked like this:

Education Fund for Daughter
$ 10,572 semi-annually starting 8/1/2009 guaranteed 4 years certain.
Guaranteed payout $ 84,576 Cost $ 25,000

Retirement Fund
$ 549 per month for 20 years certain beginning 8/11/2008.
Guaranteed payout $ 131,760 Cost $ 25,000

Mr. Richards was wise enough to see that by taking only $ 50,000 of his settlement simply waiting 15 years, he could turn it into $ 216,336 of guaranteed tax free income when he would really need the money.

As it turns out, he was even wiser than any of us had thought. The phone call I received that Friday morning was from Mrs. Richards who was wondering how to access the funds, since Mr. Richards had died in June.

In speaking with Mrs. Richards I learned that we placed the structured settlement with Metropolitan Life and, although the $ 549 per month payments were due to start earlier in the month, she had not yet received it. Understandably, she was becoming increasingly concerned because she promised her daughter a car for her senior year in high school. Although working two jobs, she could not seem to pull enough money together to buy the car. She asked me to find out what had happened to the check.

Actually, this was an easy problem to solve as most times when an annuity check is late on a deferred case it is because the annuitant has moved and forgotten to inform the annuity company of their new address. Sure enough, Mrs. Richards said they had moved a few years earlier. I took down her new address, made the necessary calls to MetLife and they in turn advised she would receive the first check in a week. We also took an added step to prevent future problems by setting up a direct deposit plan for all the payments. Five days ago, I received the following note:

“Dear Mr. Kilcoyne, Thank you very much. You are truly an answer to many prayers. God Bless you. I pray with my kids every night, this matter being on our list. I will tell them the GOOD news and certainly include you and count you among our blessings.
Very sincerely yours, Amy Richards.”

Mr. Richards thought he was building himself a bridge between a physically demanding job and retirement as well as a better life for his infant daughter by providing her with an education that he had never had access to. It turns out that what he was really doing was providing his family with the blessings that Mrs. Richards had bestowed upon me.

As I said at the outset, stories like this should end all questions. Mr. Richards took a small portion (20%) of his settlement proceeds and used it to provide for his family’s wellbeing far beyond what he could ever have hoped to. Had he lived, he would now be receiving $ 549 per month in guaranteed tax free income. If anyone is tempted to say that that’s not enough of a benefit to concern themselves about, ask if they’re married and then read them Mrs. Richards note. It can mean the world to one’s family.

Think you’re doing people a favor by structuring their settlement? You are. If you need help making them aware of their options, just call Frank C. Kilcoyne, CSSC at 800-544-5533. I am here to help.