MHB Retirement Policy Comparison: A vs B

[karush]

19
you have been given a choice between
two retirement polices as described below
Policy A: You will receive equa annual payments of
\$10000 beginning 35 years from now for 10 years
Policy B. You will receive one lump-sum of \$100,000 in 35 years from now.
Which policy would you choose?
Assuming rate of interest is 6 percent.
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ok i didn't understand just what you do with this
since as retired you would need spend the money?

 

[HallsofIvy]

Re: two retirement polices

This is pretty close to trivial. Receiving 10000 dollars a year for 10 years would give you, after 10 years, 100000 dollars. Receiving 100000 dollars now you could put some of it in the bank at any interest and wind up with more than $100000.

 

[karush]

Re: two retirement polices

you mean like this

\begin{align*}\displaystyle
&=90000+(90000)(06)&=5400\\
&=80000+(80000)(06)&=4800\\
&=70000+(70000)(06)&=4200\\
&=60000+(60000)(06)&=3600\\
&=50000+(50000)(06)&=3000\\
&=40000+(40000)(06)&=2400\\
&=30000+(30000)(06)&=1800\\
&=20000+(20000)(06)&=1200\\
&=10000+(10000)(06)&=0600\\
&\textbf{total interest earned}&=24000
\end{align*}

 

[HallsofIvy]

Re: two retirement polices

I think you missed my point. You don't need to do any arithmetic to realize that $100000 plus some amount of money is better than $100000 only.

 

[karush]

Re: two retirement polices

yeah I know
just curious

no body could could retire
on 10,000 a year!

 

[HallsofIvy]

Re: two retirement polices

3) The fact that a person has a pension of $10000 a year does not necessarily mean that is their only source of income.

2) There are some countries in the world where a person could live, comfortably, on %10000 a day.

3) That isn't really relevant to the original question.

 

[karush]

Re: two retirement polices

I'm retired
So it's relevant!

$10,000 a day?

 

[HallsofIvy]

Re: two retirement polices

I'm retired
So it's relevant!

$10,000 a day?

So am I. If you want me to do the experiment, I would be willing to try living on $10,000 a day!

 

[karush]

Re: two retirement polices

it would be budget nightmare