As a Result of an Injury Settlement with Your Insurance

question 143

Multiple Choice

As a result of an injury settlement with your insurance you have the choice between

If you could invest your money at 8% compounded annually,which option should you pick?

• A) (1), because it has a higher PV.
• B) You are indifferent between the two choices.
• C) (2), because it has a higher PV.
• D) You do not have enough information to make that decision.

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Definitions:

Adjusted Gross Income

An individual's total gross income minus specific deductions. It's used as the basis for calculating taxable income.

Tax-deferred

An investment in which taxes on the principal and/or earnings are delayed until the funds are withdrawn, commonly seen in retirement accounts like 401(k)s and IRAs.

Accumulation Period

The time frame in which an investment, such as a annuity, accumulates interest or income before disbursement or annuitization.

Distribution Period

The time frame over which payments are made from an investment, retirement plan, or insurance policy to the beneficiary.