The Motley Fool Discussion Boards

Previous Page  
Investing/Strategies / Retirement Investing 

URL:
http://boards.fool.com/iforgottosayinmyabovecalculationiwas30281892.aspx


Subject: Re: Pension, annuity, or payout?  Date: 9/25/2012 9:55 AM  
Author: Rayvt  Number: 70954 of 77331  
I forgot to say in my above calculation, I was assuming 20 years of payments for age 65 and 38 years if we take payments now. For periods that are decades long, you can't just do the simple math of $permonth * #ofmonths. The compounding is the dominating factor, and that simple calculation completely ignores it. What you have to do is compute the NPV (net present value) of the different options and compare those. Almost certainly, the NPV's will be almost the same. The company's accountants and actuaries certainly know all about NPV, even though most employees don't. I'm itching to know what the lump sum payout would be so I can start figurin'! I predict you will be sorely disappointed. The discount due to compounding is much larger than most people think. IMHO, the most important factor is getting that money into your (his) name and away from the company. The company might well not still exist 2030 years from now. 

Copyright 19962015 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us 