About the Structured Settlement Calculator
A structured settlement pays an injury, wrongful-death or lottery award as a series of payments instead of one cheque. If a factoring company offers to buy those future payments for a lump sum, the key questions are what the payments are worth to you today, and what interest rate the buyer is effectively charging. This calculator answers both.
Enter the payment amount, how often it arrives, how many years remain, any annual cost-of-living increase and how long until payments begin. It discounts every payment back to today at the rate you could realistically earn yourself, shows what the stream is worth at a typical factoring rate, and solves for the implied discount rate in any offer you have received.
Payments are assumed to arrive at the end of each period and increases are applied once a year. In the US, selling structured settlement payments requires court approval under state transfer acts, and the judge must find the deal is in your best interest — knowing the implied rate is the best evidence you can bring.
With the default inputs, the present value at your rate is $305,886.89. Change any value above to recalculate instantly.
How to use the structured settlement calculator
- 1Enter the payment amount, frequency and number of years remaining.
- 2Add any annual increase and the years until payments start.
- 3Choose a discount rate that reflects what you could safely earn.
- 4Enter a lump-sum offer if you have one.
- 5Compare the present value, the offer percentage and the implied rate before deciding.
Formula and method
Each payment P is grown by the annual increase g once per year (m payments per year), then discounted back to today at the annual effective discount rate r over the time until it arrives: the deferral d plus i ÷ m years. Adding the discounted payments gives the present value — the lump sum that, invested at r, would reproduce the same payments.
The implied discount rate is found by trial and error (bisection): it is the rate r at which the present value of the remaining payments exactly equals the lump-sum offer. A higher implied rate means a worse deal for the seller. Taxes are ignored; personal-injury structured settlement payments are generally tax-free in the US, and so is a properly approved lump sum.
- P
- Payment amount
- g
- Annual payment increase
- m
- Payments per year
- r
- Annual discount rate
- d
- Years until payments begin
Worked examples
$2,000 a month for 20 years with a $250,000 offer
240 payments totalling $480,000 are worth about $305,900 at 5%. A buyer pricing at 12% would value them near $188,900, so the $250,000 offer is better than typical — but it still implies a 7.67% discount rate and gives up about $55,900 of value.
$10,000 a year rising 3% for 25 years
The payments grow to a total of about $364,600, worth $214,600 today at 4%. The $180,000 offer is 83.9% of that value, implying a 5.52% discount rate.
Quarterly $5,000 for 10 years, aggressive buyer
Forty quarterly payments of $5,000 are worth about $150,500 at 6%. The $120,000 offer implies an 11.55% annual discount rate — roughly $30,500 less than the payments are worth to you.
Frequently asked questions
How much is my structured settlement worth?+
Its fair value today is the present value of the remaining payments discounted at a reasonable interest rate. At 5%, $2,000 a month for 20 years is worth about $306,000 even though the payments add up to $480,000.
What discount rate do structured settlement buyers use?+
Factoring companies set the rate deal by deal, and it is usually well above what a safe investment pays — it depends on the payment size, how far in the future the payments are, the paying insurer’s credit rating and the buyer’s costs. State transfer acts require a written disclosure of the payments being sold and the net amount you would receive, so you can turn each quote into an implied rate with this calculator and compare them.
Do I need court approval to sell structured settlement payments?+
In the US, yes. Federal tax law (IRC §5891) imposes a 40% excise tax on buyers unless the transfer is approved in advance by a court under a qualified state statute, and the court must find the sale is in the seller’s best interest, considering the welfare of any dependants.
Is it better to sell part of a structured settlement?+
Often yes. You can sell a fixed number of payments or a portion of each payment and keep the rest, raising only the cash you need while preserving most of your long-term income and paying less in total discount.
Are structured settlement payments taxable?+
Payments from a personal physical injury or sickness settlement are generally excluded from income under IRC §104, and a court-approved sale does not change that. Lottery and some employment-related settlements are taxable, so check with a tax professional.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.