Home     Forum     401k     401k Rollovers
    Register   Login   Members   Search   FAQs     Recent Posts    




lump sum vs annuity

Reply to topic
Money Talk > Retirement Planning

Author Thread
robertf57
New Poster


Cash: $ 0.40

Posts: 2
Joined: 08 Sep 2014
Location: AZ
Annuity decision  Reply with quote  

I think you really need to consider the risk side more carefully. An equity portfolio may see a 50% decline in value. Taking the annuity will allow you a guaranteed increase in your standard of living without any concerns over volatility and the COLA seems to be icing on the cake. A simple spreadsheet assuming a uniform return rate is too simplistic a tool to depict this question. Stock markets do not return 8% every year like clockwork. You have already won the game from what I understand of your post. I would take the 1/2 annuity and enjoy it: Spend or give away the proceeds, You two earned this. Seems like a shame not to enjoy it.
Post Mon Sep 08, 2014 8:57 pm
 View user's profile Send private message
Wino
Senior Member


Cash: $ 113.80

Posts: 560
Joined: 03 Aug 2012
Location: Dubai
Re: Annuity decision  Reply with quote  

quote:
Originally posted by robertf57
I think you really need to consider the risk side more carefully. An equity portfolio may see a 50% decline in value. Taking the annuity will allow you a guaranteed increase in your standard of living without any concerns over volatility and the COLA seems to be icing on the cake. A simple spreadsheet assuming a uniform return rate is too simplistic a tool to depict this question. Stock markets do not return 8% every year like clockwork. You have already won the game from what I understand of your post. I would take the 1/2 annuity and enjoy it: Spend or give away the proceeds, You two earned this. Seems like a shame not to enjoy it.

You have omitted Jimmy-Carter-type inflation from YOUR calculations. If we get another four years of 10%+ inflation, he'll see his annuity dry up in spending power. There are more than market-decline risks in equities.

So, the user has a choice between one risk and another. We won't know until he's finished which way would be best to go.

Average inflation 1973 to 1982 (10 years of Ford-Carter) was 8.75%. That's a 6.25% loss PER YEAR in his spending power in the annuity. Also, during that same decade, dollar-cost averaging would have been the best way to invest the money.

In short, there are many variables which won't be known until after the day finishes, so the OP has his choice of hedges and strategies. He won't know the best strategy until it is too late to decide.
Post Tue Sep 09, 2014 11:27 pm
 View user's profile Send private message

Goto page Previous  1, 2
Reply to topic
Forum Jump:
Jump to:  
  Display posts from previous:      





Money Talk © 2003-2016