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Pension or Lump Sum?
Posted on 11/13/18 at 3:18 pm
Posted on 11/13/18 at 3:18 pm
Let's pretend I have the option of taking a 60,000 year pension or a 1 million dollar lump sum. The $60K is guaranteed for 5 years but will pay for the life of me or my spouse.
The pension advantage is that there would be a steady income for 'life.'
Of course, if I take the pension and my wife and I expire at an early age, then my daughter ends up with nothing instead of 'something.'
with the national debt what it is and the interest rates becoming the size of Defense budget, I'm worried about the future market correcting/stagnating for a long period of time. BUT, I'm also worried about hyperinflation if we print money to pay our debt. So, locking in on a pension that would never change might bite me in the arse in my later years.
How about it, guys? I'll have to make a decision in the next 1 or 3 years. Loved to hear MT opinions.
The pension advantage is that there would be a steady income for 'life.'
Of course, if I take the pension and my wife and I expire at an early age, then my daughter ends up with nothing instead of 'something.'
with the national debt what it is and the interest rates becoming the size of Defense budget, I'm worried about the future market correcting/stagnating for a long period of time. BUT, I'm also worried about hyperinflation if we print money to pay our debt. So, locking in on a pension that would never change might bite me in the arse in my later years.
How about it, guys? I'll have to make a decision in the next 1 or 3 years. Loved to hear MT opinions.
18
Posted on 11/13/18 at 3:25 pm to Enadious
how old are you?
Posted on 11/13/18 at 3:26 pm to Enadious
How old are you?
How old is wife? (assuming your wife will get at least a portion of your pension if you pre-decease her)
Other investments and/or savings? Will you continue to do other paid work after retiring from this job?
Mortgage/house paid off?
Adult children that are self supporting?
How old is wife? (assuming your wife will get at least a portion of your pension if you pre-decease her)
Other investments and/or savings? Will you continue to do other paid work after retiring from this job?
Mortgage/house paid off?
Adult children that are self supporting?
Posted on 11/13/18 at 3:26 pm to Enadious
PVFC
Posted on 11/13/18 at 3:26 pm to Enadious
are you 30 years old or 65? Probably need to know that to figure what would be the best option.
That being said.... I'd likely go for the 1 million $ lump sum... Assuming you could average a 6% return on that 1 million per year, you would never touch the principle pulling out 60k per year.
Come to think about it... lump 1 million no question about it.
That being said.... I'd likely go for the 1 million $ lump sum... Assuming you could average a 6% return on that 1 million per year, you would never touch the principle pulling out 60k per year.
Come to think about it... lump 1 million no question about it.
This post was edited on 11/13/18 at 3:28 pm
Posted on 11/13/18 at 3:32 pm to KingofZydeco
quote:
Come to think about it... lump 1 million no question about it.
Yeah, I'm failing to find many situations where if want the annuity.
Posted on 11/13/18 at 3:34 pm to TigerintheNO
60 in a month
Posted on 11/13/18 at 3:35 pm to hungryone
quote:
How old are you? How old is wife? (assuming your wife will get at least a portion of your pension if you pre-decease her) Other investments and/or savings? Will you continue to do other paid work after retiring from this job? Mortgage/house paid off? Adult children that are self supporting?
Wife is my age. Debt free. Pretend that I have another 1 million to invest.
Posted on 11/13/18 at 3:37 pm to KingofZydeco
quote:
Come to think about it... lump 1 million no question about it.
But, there's no guaranteed 6% return on that. Markets correct.
Posted on 11/13/18 at 3:42 pm to Mingo Was His NameO
quote:
Yeah, I'm failing to find many situations where if want the annuity.
Is he competent to manage the money? Is potential surviving spouse competent to handle it? I can think of all sorts of people I wouldn't hand $1,000,000 and expect them to behave with sense & restraint.
Know thyself (and thy spouse).
Posted on 11/13/18 at 3:49 pm to Enadious
How will the 1 million be taxed at payout, regular income, long term capital gains?
Posted on 11/13/18 at 3:50 pm to Enadious
Lump sum and invest the money in some income producing assets (apartments, farmland, Chic-Fil-a franchise, whatever).
My reasoning is that I can beat 6% a year with most things if I’m not dealing with interest. Also, if hyperinflation is truly your biggest fear wouldn’t it make sense to put the money in an asset that could also inflate (as opposed to cash sitting in a bank)?
And of course it avoids the whole “early death” problem, as well.
My reasoning is that I can beat 6% a year with most things if I’m not dealing with interest. Also, if hyperinflation is truly your biggest fear wouldn’t it make sense to put the money in an asset that could also inflate (as opposed to cash sitting in a bank)?
And of course it avoids the whole “early death” problem, as well.
Posted on 11/13/18 at 3:52 pm to hungryone
quote:
Is he competent to manage the money? Is potential surviving spouse competent to handle it? I can think of all sorts of people I wouldn't hand $1,000,000 and expect them to behave with sense & restraint. Know thyself (and thy spouse).
I have to go with an investor and pay the fee. That's another road to go down..
Posted on 11/13/18 at 3:52 pm to Enadious
quote:
Let's pretend I have the option of taking a 60,000 year pension or a 1 million dollar lump sum.
Stupidly easy - $1 million - every time.
Tougher would be a life pension (with survivor benefits) at 85k or 90k per annum.
But, $1 million lump over $60k/year you take every...single...time.
Posted on 11/13/18 at 3:53 pm to Decisions
quote:
Also, if hyperinflation is truly your biggest fear wouldn’t it make sense to put the money in an asset that could also inflate (as opposed to cash sitting in a bank)?
I get that. Easier said than done. And, I do need an income to live.
Posted on 11/13/18 at 3:55 pm to Ace Midnight
quote:
But, $1 million lump over $60k/year you take every...single...time.
Okay, you take the bird in hand that could correct by 33% (like in 2008) over a sure 60K no matter what?
Posted on 11/13/18 at 3:57 pm to Enadious
quote:
Okay, you take the bird in hand that could correct by 33% (like in 2008) over a sure 60K no matter what?
Yes
Posted on 11/13/18 at 3:59 pm to Enadious
You need advice from a tax attorney. $60,000 per year is currently taxed at less than 12%. $1,000,000 would be a onetime hit of upwards to 37% marginal tax bracket. However, without tax considerations I would take the million and invest it very conservatively.
Posted on 11/13/18 at 4:00 pm to Enadious
quote:
The pension advantage is that there would be a steady income for 'life.'
So would the $1 million if invested wisely and that revenue stream wouldn't end once you and your wife are deceased.
Posted on 11/13/18 at 4:02 pm to LSU82BILL
quote:
So would the $1 million if invested wisely and that revenue stream wouldn't end once you and your wife are deceased.
The fear I have is that: the most important thing about retirement, is do it at the right time. What if the market corrects a year after I retire? What if it stagnates for 6 years? What's a 'wise' investment?
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