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you can only compare the income stream of the lump sum vs the guaranteed income
you cannot compare it to having the lump sum which can be used in emergency’s or spent as one sees fit in any amount if necessary for whatever they like .
personally i would take the lump sum every time and generate my own income stream off it .
40k pension or 1 million dollars in hand ….no question what i want
That is why pensions are valued differently than a lump sum with a SDR. I don't recall off the top of my head exactly how, but it considers lifespan and of course, no residual value. A lump sum depleted at a 4% SDR would likely have residual value.
That is why pensions are valued differently than a lump sum with a SDR. I don't recall off the top of my head exactly how, but it considers lifespan and of course, no residual value. A lump sum depleted at a 4% SDR would likely have residual value.
90% of all 122 -30 year cycles we have had to date ended with more then you started with a 50/50 or 60/40.
2/3’s of the time you ended with 2x what you started and 50% 0f the time 3x what you started with .
so depletion has not been the problem with a 4% swr .
the bigger issue has been dying with two much left not enjoyed , so a system of taking raises other then inflation adjusting should be considered
my wife has a 20k pension and while i know it would take 500k to generate there has never been a time or reason to ever think of it as such .
I think it is truthful - I'd just like to see it. For example, for him specifically, I wonder if he carries a Medicare Supplement policy or not. Or Medicare Advantage. What his medical deductibles are - he may be healthy and the answer is zero as he hasn't been to the Dr in years. I'm just curious. Or maybe nosey.
The article states he retired “a few years ago” at age 60. So let’s assume he’s pre-Medicare. We might assume, given he’s financially savvy, that he hasn’t started SS yet. The article also states most of his 800k is in a tax advantaged 401k.
So, little income means no income taxes. He probably gets either ACA or Medicaid, so no health care expenses. He’s older than 60, so he is eligible for $281/mo food stamps regardless of assets. Once eligible for those 2 programs, cheap cell, internet and utilities may come his way. He’s single, childless and owns the home outright. No need for LTC insurance.
He states his biggest expenses are homeowners and car insurances. So I’d assume his property taxes are not 10k a year..
Heck, in that LCOL area, he must be spending wildly on some vice to have 20k a year expenses :-)
but that is the idea of a safe withdrawal rate.. it’s based on the worst outcomes .
if we eliminated the worst of the worst times for a retiree to retire , which were retiring on the eve of 1907 ,1929 ,1937 , 1965,1966 , a withdrawal rate would be 6-1/2% inflation adjusted.
but like i say i would never have a reason to value a pension as a lump sum …..
it’s simply income the same as when i worked , or alimony or rental income , social security , or an annuity …
I would not think of a $20k pension as $500,000 if I was over 70. I would think of it as $200k not adjusted for inflation one way or the other. Plus, if it's not my pension I am certainly not counting it (especially if my wife is spending the entire amount at Saks anyways).
However, that article is completely misleading (since those people are not solely subsisting off their savings and then the other amounts of income available to them are either not mentioned, partially mentioned and generally downplayed). I agree with the post that stated the article is disingenuous.
I think you're being a bit harsh. They are five snapshots, not in-depth analyses.
If you can't make it work on $800,000 worth of money at retirement, then you shouldn't be trusted with a box of matches.
$800k boy is worried about Dementia as a single person; so, likely it's not too much money in his case. He also retired early. So, being frugal is a good move on both counts.
I think you're being a bit harsh. They are five snapshots, not in-depth analyses.
I'd expect a lot more from the Wall Street Journal. It's misleading at best. Journalism has gone way downhill.
I realize it is a quaint snapshot of people without much savings for people with several seven figures of net worth. I think it is an irresponsible piece.
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