Jamie
It was not the way
Jamie had planned to spend her first summer out of college. But when the bleachers gave way at the final basketball game in January
of her senior year, the compound fracture of both the tibia and fibula of her
left leg required not only surgery to pin it all back together, but several
months of physical therapy to regain the ability to walk unaided.
It took several months
to sort out all the claims but ultimately, in July, Jamie was faced with a
decision as to how to receive her $80,000 settlement. Although 22, Jamie’s parents were concerned about her receiving such a
large amount of money and took an active interest in her choices. They counseled her to set aside a portion of it now for retirement. With so many years to go until retirement, they knew the time value of
money would create a truly impressive retirement fund, even if she committed
only part of the money and they made a big point about the value of tax-free
versus taxable income.
Jamie had other ideas. First thing was, she wanted a car. A
red BMW 328i convertible with classic fawn interior. Next, she viewed this as the perfect opportunity to go into business with
her two friends and open a homeopathic remedy shop in Leadville, Colorado. One of the friends lived there now and had been urging Jamie to follow
her out after graduation. It all
sounded fun except there weren’t too many jobs in Leadville and Jamie had no
money to cover moving expenses and to get established. But now she could easily afford not only the car, but also the rent on a
nice little condo with enough money left over to start a business with her
friends. Her leg was healing well
and there was every good chance that the worst she’d experience was some
arthritis in her later years. That
bad fall looked to her to be a lucky break.
Ultimately, she took
$50,000 in cash and- in a move aimed strictly at appeasing her parents-
structured $30,000. The payments
included one lump sum of $20,000 at age 30 to help with the down payment on a
house and then monthly income for retirement of $522 beginning at age 62,
increasing by 3% each year, guaranteed for life with a 20 year minimum.
The move to Colorado
dried up when one of the partners wouldn’t sign a bank note and the other
could only scrounge up a third of what she had told Jamie she’d invest. Although both friends still wanted in, the financial burden of the
startup was going to fall almost exclusively on Jamie. That turned out to be a little rich even for her optimistic blood and she
bagged it. Faced also with narrow
career opportunities for her degree in sociology, Jamie decided to pursue a
graduate degree in education to broaden her hiring appeal. The money made graduate school an easy decision and the car’s a big
hit. She even lets her mother drive
it when she comes to town.
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Including Taxable Equivalent Payments
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