For a friend... 45ish years old. It's not a massive corpus, but it's not small either. Would you take a lump sum? or a lifetime annuity paying 0.5% monthly. To me the lump sum into an IRA makes most sense - any reason not to?

i totally missed the similar topic previously posted - sorry for the almost redundancy!

You would need to look at the big picture. What other cash flows he has, what are is retirement accounts like, liquidity needs? Expenses, etc…

I'd compare that to a scenario of taking the lump sum now, investing it in the market for 20 years, and then taking out 4% annually from that while it continues to grow.

Which is a more meaningful impact in retirement? Assuming he doesn't need the cash flow currently,

I took a lump sum in an IRA and put it all in BRK B at $142. It's about double what the amount would have been if I didn't roll it into BRK B.

Lump sum is almost always the answer. The thing most people forget about is their heirs and the chance you die early, as that pension goes to -0- immediately in that situation. If you have no heirs....think about your Church or Aggie NIL.

That's around 4-5% return if you assume a 30-35 year life according to some online calculator which is hopefully accurate. That seems like a reasonable rate assuming very little risk from the payor.

Maybe that helps

Of course the other big risk is death

The other factor is marginal taxes

I would probably take the lump sum

Depends on what sort of cost of living escalation is on the pension, if any, as well.

Most pensions have such a low discount rate for calculating the lump sum that the lump sum is the way to go (ie the value of the lump sum relative to the annuity is quite good). A 4% withdrawal rate on a lump sum is oftentimes very close to what the annuity would be. And if you invest it where you could get 5-8% return, not only will the initial lump sum still be there after your 4% withdrawal, you will grow the balance. Yes, there is some measure of sequence of returns risk, but that can be managed

Unless there is something extraordinary, take the lump sum.

Fireman said:

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Lump sum is almost always the answer. The thing most people forget about is their heirs and the chance you die early, as that pension goes to -0- immediately in that situation. If you have no heirs....think about your Church or Aggie NIL.

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Aggie NIL, lol. I'm gonna subsidize somebody else's business so they can further subsidize a student who already has a full ride, Alston money, and a rent-free platform to promote their "brand?" Are you out of your ever-living mind?

Lump sum - almost always.

94chem said:

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Fireman said:

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Lump sum is almost always the answer. The thing most people forget about is their heirs and the chance you die early, as that pension goes to -0- immediately in that situation. If you have no heirs....think about your Church or Aggie NIL.

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Aggie NIL, lol. I'm gonna subsidize somebody else's business so they can further subsidize a student who already has a full ride, Alston money, and a rent-free platform to promote their "brand?" Are you out of your ever-living mind?

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i was hoping the initial response was a joke... but if it wasnt, you articulated my thoughts dead on.