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richinaz: In most cases I guess you can use the 4% SWR as a way to compare a lump sum vs a pension.

For example $25K *4% = $1K pension.

It's not clear what you're responding to here, since you've just started the thread. Or is this in some way a continuation of the previous thread on annuities?

In any event, to compare them also requires knowing how the lump sum is created in the first place. I know that in my own instance--retiring in 2002 and opting for a lump sum instead of a pension--the lump sum was calculated as the Present Value of a hypothetical stream of payments that ran through to something like age 120, with the fraction of the fixed annual pension getting smaller each year based on the probability of my living through that age. The current prime interest rate was also factored into the calculation (the lower that was, the higher the resulting lump sum, given how PV is calculated).

And then you'd need to do some estimates based on how said lump sum is invested, what kind of growth (if any) can be anticipated, and how that then would lead to RMD payouts from an IRA--lump sums being eligible to be deposited in an IRA--

etc., etc.

I'm quite confident that in my case, whether or not the pension--had I taken it--had had a COLA provision, I've done better with the lump sum. And that's in no small measure because I've been a FOOLish investor with that lump sum these nearly twenty years (and even before)...

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