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Old 01-03-2014, 02:30 PM
 
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At 62.5 years of age here is the choice, $216,629 lump sum or $1,329 per month till I die. Reasonable health, non smoker but Dad died at 68. My thought is take the money and run. Thoughts?
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Old 01-03-2014, 02:33 PM
 
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yes. nothing to think about
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Old 01-03-2014, 02:47 PM
 
Location: Idaho
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Close call. Ask yourself why your dad died and if you are very similar to him, as to physical conditioning. Generally, those of us our age, (I also am right at 62.5 years young), are much more physically fit than our parents are/were.

I did a quick calculation and assuming you will have to pay taxes on your lump sum, (assuming you would be in the 35% tax bracket with that amount), what is left divided by your monthly payment amount runs out to just under nine years as the break even point. Meaning, if you die before you reach 70, take the lump sum. If you live longer, take the monthly amount.

But, I would highly recommend you spend a few bucks and some time with a fee-only financial planner. (Not somebody that sells anything, someone who only gives financial advice and earns zero commissions for anything they sell or recommend.) Might be worth a visit with your doctor too, to get a sense of where you are physically.
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Old 01-03-2014, 02:51 PM
 
Location: Columbia SC
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Assuming no growth on the $216K you would be collecting more then it after 163 months or after 13.5 years.

$1,329 is about 6.1% of $216.6K. Not a bad return for low risk.

I am not suggesting anything. Just throwing out some ways to look at the amount.

You say your Dad but remember you have your Mother's genes also, which your Dad did not have. Look at your Dad's siblings and your Mother's siblings. All my Dad's siblings outlived him in age. My Mom's outlived 3 of her 4 siblings. My Mom died at 76, My Dad died at 68. There average age was 72. I am 72......LOL

ADDITION

As another poster said. I have always used an independent financial advisor. I do not trust financial advisors that have something to sell me.
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Old 01-03-2014, 08:54 PM
 
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take the cash

One in the hand is worth two in the bush
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Old 01-03-2014, 09:28 PM
 
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Quote:
Originally Posted by caco54 View Post
At 62.5 years of age here is the choice, $216,629 lump sum or $1,329 per month till I die. Reasonable health, non smoker but Dad died at 68. My thought is take the money and run. Thoughts?

I take it the monthly payment is not adjusted for inflation? How good are you at managing money?
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Old 01-03-2014, 09:44 PM
 
Location: Florida -
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The fact that you must pay lump-sum taxes in the year taken ($216K less 35% = $140K), $1329 per month ($15,949 per year) represents a very respectable 11% annual return (assuming no growth in principle or indexed income). Even the before-tax payout on the entire $216K represents a 6.1% return, which is significantly better than the 4-5% recommended by most financial advisors.

Not sure what plan you have in mind for the lump sum payout ... or if you are single/married, but, it's unlikely that you will be able to spread-out the lifetime retirement benefits of $140K lump sum ...to give you a comparable return -- with little/no risk!

If you are married or have heirs (and/or are concerned about your longevity), you might want to consider taking the monthly lifetime payout ... and backing it up with a cost-effective, Term life insurance policy. We did exactly that with my wife's pension and significantly increased our long-term projected income and payout.

In retirement, lifetime pensions are gold! -- Resist the urge to take the lump sum now ... and set yourself up with a lifetime income ... and an inheritance for your family. You won't regret it later.

Last edited by jghorton; 01-03-2014 at 10:01 PM..
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Old 01-03-2014, 09:52 PM
 
Location: Los Angeles area
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Originally Posted by John7777 View Post
I take it the monthly payment is not adjusted for inflation? How good are you at managing money?
John7777 has hit upon one important thing. OP, you know yourself and the rest of us do not know you. You need to ask yourself if the lump sum is likely to be frittered away in lavish but wasteful living within a few years. Please do not be insulted; I am not saying that's the way you will handle it. But there are some people whose lack of self-discipline would make them poor candidates for ever taking a lump sum, and so it's important to be honest with yourself in that regard.
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Old 01-03-2014, 09:54 PM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,601 posts, read 39,974,527 times
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Do you need this money as income / living expense? (Maybe you can defer payouts / lump-sum and use 'cheaper' money)

You can surely take the Lump Sum as a 'qualified rollover?' = taxes only on withdrawals, as they are taken. (Better know this..).
If married, are there survivor benefits on the monthly payout? (Likely not)
Who is managing the Monthly? (will they default?).

Be cautious of the first 'investor' who wants to sell you an annuity. (Some are OK, some are not)

Chances are... They (advisers) will all want it! (or as much as they can get). Even fee based advisers often have an agenda for YOUR money.

Be wise, definitely run the numbers. And examine your objectives.
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Old 01-03-2014, 11:15 PM
 
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So the dilemma is that you need the ongoing income, but you will feel stupid (or really you feel your heirs will think you were stupid) if you decline the lump sum and then die shortly afterwards. You (and your heirs) will also be frustrated if you take the lump sum and just overspend a little bit here and there, and the money is gone too soon.

To me, the best way to take the lump sum and convert it to an ongoing income stream that has some inflation protection and can still be left to your heirs is to invest it in income producing real estate. If you don't have any experience with this, than maybe this isn't the time to learn, but if you have bought and sold houses over the years and are comfortable with making these types of investment decisions, I think that's an option you should consider.

The inflation protection is important here. In 20 years, $1329/month probably won't buy you nearly as much as it does today. But the house that is renting for $1329 today will likely rent for much more in 20 years, allowing your income to keep up with rising costs.
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