My Pension Dilemma: Is $58,000 Today Enough to Give Up $12,200 Per Year?

When deciding between a lump-sum payout of $58,000 or a $12,200 yearly pension starting at 65, it’s important to consider life expectancy and inflation. The pension, while providing guaranteed income, loses value due to inflation, potentially reducing its purchasing power significantly over time. If the Redditor lives to 90 or 95, the pension could eventually provide substantial income, but if he dies prematurely, he risks leaving his heirs with nothing. This highlights the importance of evaluating personal longevity and financial needs when considering retirement options.

Starting at 65, the Redditor will receive $12,200 per year for life, assuming he lives long enough to collect.

If he lives a long life, the pension could provide steady income for 25 to 30 years, totaling $305,000 to $366,000.

Yet does the same apply to a pension, particularly if it is a relatively small sum?

By 65, inflation could reduce its real value to $7,200 to $8,500 in today's dollars after 17 years.

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