Select a different option from the menu below to see how it compares to a Structured Settlement:
Structured Settlements versus a 529 College Plan
|Issue / Concern
|529 College Plan
|What types of securities/insurance products support the payments?
|A fixed annuity contract issued by a life insurance company.
|Offers a variety of investment options, each with its own rate of return.
|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. This option is designed only as a savings vehicle for qualifying educational expenses.
|Is there a guarantee with this option?
|Yes. The annuity issuer guarantees payments, according to the terms of the structured settlement agreement.
|No guaranteed return on investments.
|What are the costs and fees associated with this option?
|No additional cost to annuitant.
|Involves account management and securities management fees.
|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.
|Because investment returns are not predictable, there is no guarantee that this option will keep pace with inflation.
|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.
|Withdrawals are federal income tax free only if used for qualifying educational expenses. Income tax and 10% penalty must be paid on any withdrawals for non-educational purpose.
|Is this option affected by market fluctuations?
|No. Benefit payments are determined and fixed at the time the annuity contract is issued.
|Yes. Earnings and principal will be affected by market ups and downs.
|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.
|Maximum allowable contributions vary by state. Once plan is set up, no changes to the investment options are allowed. Some states require that student must attend school within the same state.