ST Alpha - "NPV that shit. ~4.2% is break even. Above that lump sum is better, below annuity. I go lump sum. -- nm" (Reading a Post)

SlickerTalk
Search Archives
The Leaderboard
The FAQ

Login
Create Account

Search Dr. S. Talk
TT/ST Wiki
How Well Do You Know ...

RSS Feed

Hosting by DigitalOcean

Support ST on Ko-Fi

Down to Post

Backboards:

Posts: 153

In response to "ST Poll: You win $1.2 Million." by Strongbad

NPV that shit. ~4.2% is break even. Above that lump sum is better, below annuity. I go lump sum. -- nm

Posted by mafic Jul 30 '24, 17:46

(No message)

Responses:

You have to discount for the differential in marginal tax rates as well. -- (edited) - znufrii Jul 30, 17:53 4
- So many accounting nerds here.... -- nm - Baron of the Rings Jul 30, 17:55 3
  - Then you have to consider the marginal propensity to spend vs. save the annuity payments. -- (edited) - znufrii Jul 30, 18:10 1
    - redid the model to include state taxes (resulting in an after-tax lump sum payout of ~$472k) and drops the break-even return to ~6.5% - znufrii Jul 30, 18:46
  - Right? - Epiphany Jul 30, 17:57
I misread! Thought you had $800k after tax. With $400k after tax break even is like 14%. I probably go annuity. -- nm - mafic Jul 30, 17:48 3
- But Madoff promised me at least that much! -- nm - Baron of the Rings Jul 30, 17:54
- Said another way, do you trust your ability to triple your money over 20 years? -- nm - Strongbad Jul 30, 17:53 1
  - You’d need just under a 6% annual return (using the Rule of 115) based on that question. -- (edited) - znufrii Jul 30, 17:57
I was doing some similar (but much rougher) calculations. :) -- nm - Baron of the Rings Jul 30, 17:48 1
- But beyond the math, I think it also depends on what the current state of your retirement savings is. - Baron of the Rings Jul 30, 17:53

Post a message top

Replies are disabled on threads older than 7 days.