In September 2012, we posted an article — But Interest Rates Have To Go Up! Don’t They? — which explained that interest rates had been falling for roughly thirty years, and despite the multitude of “experts” arguing to the contrary, nobody could predict higher rates in the immediate future with any degree of certainty. At the time, the 10-Year Treasury Rate, a commonly cited benchmark for interest rates throughout the economy, was 1.72%. For the week ended May 13, 2016 — over three and a half years later — the same rate was 1.75% (no doubt, not the increase the “experts” had in mind).
In the interim, on December 16, 2015, and with much fanfare, the Federal Reserve “raised interest rates” (a very commonly misunderstood and misreported term). On that day, the 10-Year Treasury Rate was 2.30%. In other words, rates have fallen by almost one-fourth since the Fed “raised” them. Also in the interim, Europe and Japan have continued to lower interest rates, with the latter even embracing negative rates.
As we pointed out in the prior article, trends, by definition, do not last forever, and so interest rates are likely to rise at some point. It is important, however, to maintain a healthy skepticism towards anybody who claims to know 1) when this will happen; or 2) that rates will not continue to fall, perhaps significantly, first. Furthermore, attempting to time the market in this way is inappropriate for many personal injury victims.
Fortunately, the key benefits of a structured settlement are unrelated to interest rates. A structured settlement allows the injury victim and his or her family to design and customize a guaranteed, tax-free, predictable income stream, which is not subject to any ongoing investment decisions or fees or commissions to advisors. The return on a structured settlement is generally competitive, but for many personal injury victims, the safety, security and piece of mind it provides are far more.