He said it would be taxed at the usual rate, so the $1M immediately becomes

Jun 16, 2021
3:12:44pm

Pickett Contributor

More like $600,000 completely changing your calculations. Having said that, it may still work out more in your favor to take the lump sum. Obviously how old you are now and how risk averse you are plays into it too.

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Pickett

Bio page: Pickett
Joined: Apr 30, 2016
Last login: Feb 1, 2022
Total posts: 1,359 (0 FO)

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Messages

Author

Time

POLL: Choose one. Assume both choices will be taxed at the usual rates and will not be adjusted for inflation.

Nikomedes B+

6/16/21 1:14pm

C. I’ll take the $50/month. Stay humble.

TCuz

6/16/21 1:14pm

The present value of the 5k a month is really close to $1million at 6% growth.

Turbo

6/16/21 2:01pm

Because inflation and because one can diversify the risk with the $1M lump sum.

garyfan

6/16/21 2:09pm

Edit: I think inflation-adjusted was an edit that wasn’t there originally.

garyfan

6/16/21 2:10pm

Correct.

supertux

6/16/21 4:17pm

Inflation adjusted makes it obvious in favor of the guaranteed income

Turbo

6/16/21 8:03pm

Time value of money is not the same thing as inflation. Those are two different

garyfan

6/16/21 9:18pm

Because you’re giving up $1million right off the bat. You’re only considering interest. I START with $1mil in hand.

mvtoro

6/16/21 2:30pm

That’s factored in the present value calculation dude. Kind of the point of the

Turbo

6/16/21 8:00pm

It’s still the wrong choice. See my last paragraph in my other post taking tax into account. Inflation makes it a no-

mvtoro

6/16/21 10:16pm

Wow. Right now 60%+ of respondents are pretty clearly wrong IMO.

mvtoro

6/16/21 2:21pm

He said it would be taxed at the usual rate, so the $1M immediately becomes

Pickett

6/16/21 3:12pm

And your income isn’t taxed if you don’t take a lump sum? Yes. Depending on your income you’ll probably pay a higher

mvtoro

6/16/21 10:07pm

You should take a finance class…

Turbo

6/16/21 8:04pm

I have, thanks 👍🏻. YMMV, but the $5K/month would have been a terrible decision for me. Annual passive income has been

mvtoro

6/16/21 10:27pm

Big lump sum every time.

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