No. of Recommendations: 2
rkmacdonald posted:

$1200 a month is statistically equal to $182,000 based on mortality tables. Said another way, if you invest the $182,000 in fixed income instruments, and withdraw interest plus a small part of principle each month for the rest of your life, you'll be just out of money when you die.

This is not correct. It's a trap, actually. The mortality basis is only valid over a large group. Meaning that on average, $182,000 will provide $1,200/month for the average lifetime of all of the company's 62 year old males. For all kfclabo knows, he may outlive that life expectancy (I'm guessing 81 or 82 - I'm an actuary) by 10 or 20 years. Then he will be in big trouble if he took the lump sum.

On the other hand, kcflabo could die (heaven forbid, but you should be used to this on this board) within weeks of getting his retirement benefit. In this case, at least the annuity offered os 10 years certain and life, but the amount paales in comparison to the lump sum.

You really need to try and estimate how long you will live, and how much longevity risk you are willing to take, and how much investment risk you are willing to take.

Taking the annuity absolves you of all of those risks. Taking the lump sum puts it all on your shoulders.
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