How to maximize your Iowa workers’ comp award: "Take a lump sum or structure you settlement and do it now before interest rates rise.", Steve Lombardi
If you’ve been injured on the job and have filed a claim for workers’ compensation, at some point you need to contemplate what sort of monetary award is better for you: do you want to be paid in one lump sum, or do you want that sum broken down so that you get paid in weekly installments? We can answer the question for you—take that lump sum and run with it.
Why? It comes down to the fact that if you get a lump sum, you get to control your money. To illustrate how this works, let’s use an oversimplified example and say your options are these:
A. Get paid $500 each week for the remaining 20 years of your life knowing that if you die the weekly benefit stops. OR
B. Get paid a lump sum of $520,000.
If you do the math, you’ll figure out that if you take option A, you’ll get paid $520,000 over the course of twenty years. That’s the same amount you get paid if you take option B. What makes the difference is that if you take option A, you’re getting paid slowly—the money just trickles in. It takes that whole 20 years to accumulate $520,000.
But if you take option B, you’ve accumulated that $520,000 from day one and it is all tax free, meaning you won't pay income tax on it. And that means you can stick it in the bank, and gain interest on it; meaning now it is working for your bottom line. Sure, you could do the same if you were getting $500 a week instead. But no matter the interest rate, you’d be getting a whole lot more money if you commute when interest rates are low. As interest rates rise the commuted amount decreases; meaning you get less if you take a lump sum - that is because of something called the discount rate. You want to control your money when interest rates are low. This isn’t even taking into account the effects of future inflation—$X in 2014 likely has significantly less buying power than $X in 2034.
If you would like us to help you increase your bottom line call us at 515-222-1110. Ask Barbara for an appointment to meet with Steve and Katrina. Call NOW!
Iowa Workforce Development has outlined the different types of settlements on its website. The lump sum payment is called a “full commutation”. It is this firm’s belief that full commutation should be the standard for all permanent total disability awards.
There is a difference between a structured settlement and an ongoing award. An ongoing award can be challenged and taken away from you. A structured settlement is a done-deal with no possibility of a review-reopening proceeding. For a better explanation call us and schedule a consultation. If we represent you on the full commutation there is no charge for the consultation; if we do not then we charge for the consultation. 515-222-1110