A common problem, with many applications. But we’re talking about finance. In the lives of most, money comes in a little at a time. We work X number of hours and get $X on our paycheck or salary. Very occasionally (but in the lives of most), we get a lot of money in one fell swoop. This is typically called a “windfall”, though it can be a court settlement, an inheritance, lottery winnings, or any other several sources of big money fast.
When and if you receive funds like this, you’ll likely wonder to yourself if it’s better for you to be able to access the funds all at once or over time. After all, wouldn’t it be better to tithe it out over months or years? In fact, there are financial products which are structured to give you your money in this way. Annuities are a perfect example.
Annuities – A Little At A Time
Annuities are usually set up by someone on your behalf, though you may create one yourself. Money will be paid, gradually or all at once, into the annuity, then paid out over a set amount of time until the money is gone. That way, there’s no way to spend it all at once. This is a sort of idiot-proof approach to passing along big sums of money to another person. It’s very unlikely to blow up in someone else’s face. (It’s also why some rich parents set up a trust for their kids that only pays them a certain amount each year. It lowers the chances they blow the family fortune in one crazy night of partying.) [Read the full article]