Settlement Annuity vs. Mutual Funds

Frequently Asked Question	Structured Settlement Annuity	Equity Mutual Fund
What types of securities/insurance products support the payments?	A fixed annuity contract issued by a life insurance company.	An investment company operates the fund, pooling the assets of many investors and investing in stocks and/or bond securities.
Can this option provide a stable, lifetime income?	Yes. Payments and distribution schedule are determined up front. Can provide a dependable, predictable income stream that you cannot outlive.	No. Historically, equities have shown the greatest potential for long-term growth. But they also entail a higher degree of investment risk, which means they may not be a reliable source for ongoing income needs. Earnings may stop altogether if fund performs poorly.
Is there a guarantee with this option?	Yes. The annuity issuer guarantees payments, according to the terms of the structured settlement agreement.	No. Share prices and returns will fluctuate with investment performance.
What are the costs and fees associated with this option?	No cost to annuitant.	Management and expense fees cover the costs of managing the fund and are deducted from returns. Fund may also charge a front- or back-end "load" (i.e., sales charge), redemption fees (paid by investors when they "redeem," or sell shares) and 12b-1 charges.
Will this option keep pace with inflation?	A cost-of-living adjustment (COLA) feature is available that can help offset the effects of inflation. This option must be elected when the settlement is designed.	Designed for long-term growth. Historically, a good choice for keeping up with inflation. Total return will depend on the performance of underlying securities. Past performance is not an indicator of future results.
What are the tax consequences?	Income provided by a qualified structured settlement is TAX-FREE, provided the damages received as periodic income (other than punitive damages) are the result of personal physical injuries or physical illness.	Taxes must be paid as income is earned and distributed – which mutual funds must do annually by law. Capital gains or losses from sales of mutual fund shares have additional tax consequences.
Is this option affected by market fluctuations?	No. Benefit payments are determined and fixed at the time the annuity contract is issued.	Fund yield, share price and return will vary, depending on market conditions. You may have a gain or a loss, depending on when you sell your shares.
Can I make changes to this option after I select it?	No. The payment amount and schedule are fixed and may not be changed or accelerated. Under certain hardship situations and pursuant to court order, payments may be sold in whole or in part for cash at a discount.	Money can be withdrawn or moved from one mutual fund to another. Charges, fees and taxes may apply to each transaction.