Structured settlements provide a real value as a stable respite from market volatility Always check the taxable equivalent yield to easily compare the internal rate of return of a stable structured settlement payment stream or payment streams to a taxable alternative.
Structured settlement payments representing damages for physical injury or physical sickness are income tax-free. This includes any growth in excess of the structured settlement funding amount. While lump sum cash settlements are income tax-free for physical injury and physical cases, if the money is then placed in a traditional investment, then any growth may subject to income taxes.
The taxable equivalent yield chart below helps you quickly and easily compare the yield on a structured settlement to the yield on a taxable investment.
Structured settlements offer significant tax benefits to plaintiffs, especially with today’s interest rates!
If your head is getting turned by the return or yield on CD’s ,money market funds, or an alternative investment and the alternative investment is taxable, use the net taxable yield chart as a simple way to true up the comparison. For example, 4% taxable income nets out to less than 3%, once your tax bracket gets above 25%. Also consider that CD’s and money market funds are not intended to be long term investments. See Historical CD Interest Rates 1984-2025 | Bankrate
IMPORTANT NOTE Should you be contacted by someone trying to buy structured settlement payments from your existing structured settlement for pennies on the dollar, use a rate in existence when the structured settlement was established (i.e., not the rate paid by structured settlement today) to gain a better understanding of the value of what you actually have. For example, if you’re 34 in March 2025 and your structured settlement was established in April 1996 (when you were 5 years old), the structure might have an Internal Rate of Return of 6.8% to more than 7% income tax-free on the original investment. “Cash Now” Buyers can only offer you pennies on the dollar. So, be mindful that you must first make up what you lost by selling to them and THEN you have to take on more risk without the level of certainty you may have with your structured settlement.
Another Helpful Resource from 4structures.com LLC Structured Settlement IRR Rate of Return Compared to Other Investments
Last updated April 12, 2025
|
TAXABLE EQUIVALENT YIELD
|
||||||||
|
Compare the higher taxable interest required to equal, income tax-free
structured settlement
accumulation at various structured settlement internal rates of return (IRR) that you see on the structured settement proposal |
||||||||
| Tax-Free Rate | 15% taxable | 18% taxable | 28% taxable | 31% taxable | 33% taxable | 35% taxable | 38% taxable | 40% taxable |
| 2.0% | 2.35 | 2.44 | 2.78 | 2.90 | 2.99 | 3.08 | 3.23 | 3.33 |
| 3.0% | 3.53 | 3.66 | 4.17 | 4.35 | 4.48 | 4.62 | 4.84 | 5.00 |
| 4.0% | 4.71 | 4.88 | 5.56 | 5.80 | 5.97 | 6.15 | 6.45 | 6.67 |
| 5.0% | 5.88 | 6.10 | 6.94 | 7.25 | 7.46 | 7.69 | 8.06 | 8.47 |
| 5.5% | 6.47 | 6.71 | 7.64 | 7.97 | 8.21 | 8.46 | 8.87 | 9.32 |
| 6.0% | 7.06 | 7.32 | 8.33 | 8.70 | 8.96 | 9.23 | 9.68 | 10.17 |
| 6.5% | 7.65 | 7.93 | 9.03 | 9.42 | 9.70 | 10.00 | 10.48 | 11.02 |
| 7.0% | 8.24 | 8.54 | 9.72 | 10.14 | 10.45 | 10.77 | 11.29 | 11.86 |
| 7.5% | 8.82 | 9.15 | 10.42 | 10.87 | 11.19 | 11.54 | 12.10 | 12.71 |
| 8.0% | 9.41 | 9.76 | 11.11 | 11.59 | 11.94 | 12.31 | 12.90 | 13.56 |
| 8.5% | 10.00 | 10.37 | 11.81 | 12.32 | 12.69 | 13.08 | 13.71 | 14.41 |
| 9.0% | 10.59 | 10.98 | 12.50 | 13.04 | 13.43 | 13.85 | 14.52 | 15.25 |
| 9.5% | 11.18 | 11.59 | 13.19 | 13.77 | 14.18 | 14.62 | 15.32 | 16.10 |
| 10% | 11.76 | 12.20 | 13.89 | 14.49 | 14.93 | 15.38 | 16.13 | 16.95 |
|
NET TAXABLE YIELDS
|
||||||||
|
This table shows the after-tax
yields for a given taxable
interest rate.
Would you be better off with a structured
settlement? |
||||||||
| Taxable Rate | 15% taxable | 18% taxable | 28% taxable | 31% taxable | 33% taxable | 35% taxable | 38% taxable | 40% taxable |
| 1.0% | 0.85 | 0.82 | 0.72 | 0.69 | 0.67 | 0.65 | 0.62 | 0.60 |
| 1.5% | 1.28 | 1.23 | 1.08 | 1.04 | 1.00 | 0.98 | 0.93 | 0.90 |
| 3.0% | 2.55 | 2.46 | 2.16 | 2.07 | 2.01 | 1.95 | 1.86 | 1.80 |
| 4.0% | 3.40 | 3.28 | 2.88 | 2.76 | 2.68 | 2.60 | 2.48 | 2.40 |
| 5.0% | 4.25 | 4.10 | 3.60 | 3.45 | 3.35 | 3.25 | 3.10 | 2.95 |
| 5.5% | 4.68 | 4.51 | 3.96 | 3.80 | 3.69 | 3.58 | 3.41 | 3.25 |
| 6.0% | 5.10 | 4.92 | 4.32 | 4.14 | 4.02 | 3.90 | 3.72 | 3.54 |
| 6.5% | 5.52 | 5.33 | 4.68 | 4.48 | 4.36 | 4.23 | 4.03 | 3.84 |
| 7.0% | 5.95 | 5.74 | 5.04 | 4.83 | 4.69 | 4.55 | 4.34 | 4.13 |
| 7.5% | 6.38 | 6.15 | 5.40 | 5.18 | 5.02 | 4.88 | 4.65 | 4.43 |
| 8.0% | 6.80 | 6.56 | 5.76 | 5.52 | 5.36 | 5.20 | 4.96 | 4.72 |
| 8.5% | 7.23 | 6.97 | 6.12 | 5.86 | 5.69 | 5.53 | 5.27 | 5.02 |
| 9.0% | 7.65 | 7.38 | 6.48 | 6.21 | 6.03 | 5.85 | 5.58 | 5.31 |
| 9.5% | 8.07 | 7.79 | 6.84 | 6.56 | 6.36 | 6.18 | 5.89 | 5.61 |
| 10% | 8.50 | 8.20 | 7.20 | 6.90 | 6.70 | 6.50 | 6.20 | 5.90 |
Have a question? Need a settlement problem solver? I’m here to help. Call structured settlement expert John Darer at 888-325-8640, or send a message and I’ll be in touch.
