Lump Sum or Monthly Pmts

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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KipZoji
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Joined: Sun Jul 06, 2014 7:14 pm

Lump Sum or Monthly Pmts

Post by KipZoji » Sun Jul 06, 2014 7:23 pm

After receiving a fixed monthly payment amount of $1,056 for six years, the company has offered me the choice of taking a lump sum payment of $128,000, or continuing with the monthly payments for life. I am seeking suggestions.

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jimb_fromATL
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Location: Atlanta area & Piedmont Triad NC and Interstate 85 in between.

Re: Lump Sum or Monthly Pmts

Post by jimb_fromATL » Sun Jul 06, 2014 8:21 pm

KipZoji wrote:After receiving a fixed monthly payment amount of $1,056 for six years, the company has offered me the choice of taking a lump sum payment of $128,000, or continuing with the monthly payments for life. I am seeking suggestions.


How old are you?

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Taylor Larimore
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Location: Miami FL

Re: Lump Sum or Monthly Pmts

Post by Taylor Larimore » Sun Jul 06, 2014 8:52 pm

KipZoji wrote:After receiving a fixed monthly payment amount of $1,056 for six years, the company has offered me the choice of taking a lump sum payment of $128,000, or continuing with the monthly payments for life. I am seeking suggestions.

KipZoji:

Welcome to the Bogleheads Forum!

More questions:

How is your health?
Are you married? If so, what is your spouses age and is a joint payment available?
Do you feel the monthly payment is a secure guarantee?

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

KipZoji
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Joined: Sun Jul 06, 2014 7:14 pm

Re: Lump Sum or Monthly Pmts

Post by KipZoji » Sun Jul 06, 2014 9:26 pm

Age: 72
Marital Status: currently single
Health: good
Company is secure

ralph124cf
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Re: Lump Sum or Monthly Pmts

Post by ralph124cf » Sun Jul 06, 2014 9:42 pm

Immediateannuities.com quotes that 128,000 would buy an immediate annuity of only $873/month for a single male. A $1,056/month annuity would cost $156,000.

If your health is poor, like heart problems, cancer, or diabetes, this might be a reasonable deal. If you are in normal or better health, not a good deal.

Ralph

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Taylor Larimore
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Re: Lump Sum or Monthly Pmts

Post by Taylor Larimore » Sun Jul 06, 2014 9:44 pm

KipZoji:

According to http://www.immediateannuities.com, the highest lifetime income obtainable with an investment of $128,000 in a commercial insurance company is $873/month.

In my opinion, your guaranteed income of $1,056/month is a bargain compared with their lump sum offer and subsequent investment risk.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

KipZoji
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Joined: Sun Jul 06, 2014 7:14 pm

Re: Lump Sum or Monthly Pmts

Post by KipZoji » Sun Jul 06, 2014 10:18 pm

Taylor,
Thanks very much. That is the conclusion I am coming to.
Cheers,
Kip

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pjstack
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Location: Harbor City, CA

Re: Lump Sum or Monthly Pmts

Post by pjstack » Sun Jul 06, 2014 10:42 pm

$1056/month equals $12,672 per year. That goes into $128,000 a little over ten times.

If you think you might live longer than ten years, take the $1056/month!
pjstack

KipZoji
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Re: Lump Sum or Monthly Pmts

Post by KipZoji » Sun Jul 06, 2014 11:32 pm

Thanks, pjstack. I agree.

ubermax
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Re: Lump Sum or Monthly Pmts

Post by ubermax » Mon Jul 07, 2014 5:54 am

This question , lump sum or annuity , seems to come up often and if you search on the topic you get a flood of responses which are hard to sift through - but if you search by author and enter G$$ you'll get a more manageable list - in my opinion he gave some very thoughtful ,thorough, and knowledgeable responses to this question.

It will still take a little time to read the responses but a worthwhile exercise in my opinion.

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