re: Would you choose $5 MILL in one check today, or $7.5 MILL paid over 5 years?

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Ha, ok, so you are a moron. You cannot even begin to make this comparison mathematically without the existence of an interest/discount rate.

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Ha, ok, show me the math.

7.5MM 5 year annuity earning 10% annually.
5MM lump sum earning 10% annually.

Do it again at 20%.
Try it again at 30%.

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7.5MM 5 year annuity earning 10% annually.
5MM lump sum earning 10% annually.

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You know of something that will earn 10% annually the next five years??? If so, you should start a hedge fund immediately.

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You know of something that will earn 10% annually the next five years??? If so, you should start a hedge fund immediately.

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Exactly, there's so many financially ignorant people on here throwing out preposterous annual return rates of 9%, 10%, 12% and saying compound interest would magically turn your $5 million into $8 million in 5 years. Please tell me WTF funds you will buy to guarantee those returns. Do you really want to put that money into risky funds and take the quite likely chance of blowing a cushy retirement wherever you choose?

I'll take $7.5 million and I will invest it all, retire in 5 years, and withdraw 3-4% annually as my income. Then I'd travel the country and world instead of getting up for work during January in Chicago and sitting on my arse at the office all day.

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You know of something that will earn 10% annually the next five years??? If so, you should start a hedge fund immediately.

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Me and you both, but if you've read my responses in this thread, I've made it clear that I don't find 8.5% to be a reasonable expected rate of return in the market year over year.

If at 25, somebody told me they could guarantee me 8.5%/year for the rest of my life no more/no less, my money would be sitting on the table.

At a 7% interest into a managed municipal account with favorable tax advantages.
The $5million now after 5 years would be equal to about $7.84million
Now the $7.5 over 5 years and you invest that in the same account after the 5 years would be about $9.89M.
I'll take the 7.5 and dollar cost average it over the years!

I'd take the $5 million right now. There's no guarantee you'll be alive tomorrow

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It depends on your age. Bernie madoff is scary because he was using other people funds to find those accounts. But there are multiple funds that have averaged over 12%. But again that more depends on your age, your time horizon, and what your trying to accomplish with this money. At my young age I can be risky! I can make up the down times. But I personally would do a mixture of variable annuities, municiple funds, and a little aggressive growth. But I'm in my 20s.

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Thanks for the response.

Wow.. I always assumed that 12% percent return was one of those ' too good to be true' investments. What type of Funds can give one 12% return?


Late 30's or so ? Is it being financially irresponsible or too conservative taking 4 or 5% medium risk & living on 200- 250k?

I am beyond exemplary at living within my means($200- 250 k annually with no debt would be a dream), but a bit weary of the markets.

I' m relatively aggressive with my 401k( 80-85% stock/ mutual funds) ,but I would fear losing a once in lifetime $5 million dollar windfall to over aggressive investing.

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You are without a doubt incorrect here, assuming that both scenarios use the same rate

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Considering 40% tax rate and I'm not factoring in NPV because it still isn't going to work in your favor, but feel free to do so.

Lump sum at 10%



Annuity at 10%



Lump sum at 20%



Annuity at 20%

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Yet one can invest any or all of the 1.5 million immediately just like the 5 million. Then take the 1.5 million the next year and and use that for a 4 year investment, etc. So in reality that 8.5% return would not be even close to sufficient essentially break even.

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I don't think you read my post at all.

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In other words, there is clearly an answer that is superior to the other. Unless there are exteme outlying circumstances, the 7.5 million is superior to the 5 million.

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This is just not true. How is it that all of us sat through the same finance classes and none of you seem to remember that the cornerstone of investing decisions, the positive correlation between risk and reward (risk tolerance), is completely subjective and cannot really be quantified? I mean I would get the point if it was the same fact pattern, but lets say it was 5M vs 10M/15M+ rather than 7.5M; you just start to sound impatient as the annuity gets larger. But even then, $5M is enough for a lot of people to live the exact life they want, and never have to work again, starting today. There are other folks that would say hey, I never had shite for money before and have done just fine, let me throw it on black and walk out the door the same day with $10M while you are waiting on $7.5 because he doesn't care about investing.

Do you think it is a coincidence that most of you guys that are agreeing that the annuity option is far superior, also seem to agree that other people's opinions on returns greater than 8% are outrageous? I don't; I think it is because your perceptions about market returns are similar, and therefore are choosing to take the option that you think will yield the highest return. I am not saying you guys are wrong in that

To say that one answer is clearly better than the other is IMO only using considerations from a completely theoretical standpoint, without regard for the human element, which I assume is the reason the question was asked in the first place.

Just to be clear, if each option came along with a guaranteed rate of interest (as in take it or leave it if you want to invest the money), and that rate was 8.5% or below, then yes, there is an objectively superior answer in terms of how much money you will have at the end of 5 years (or 4 if Annuity Due). However, those are not the facts, and my stance remains that there is no superior answer.