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My father, who worked in Group Insurance for 35 years, had the best rule of thumb for retirement planning...

He said that $1M at age 65 is worth $60K a year, indexed to inflation, for life.

So, work from there. The original question didn't mention indexing, so you'll have to figure that in. $100K in 50 years will probably be below the poverty line. Also, if not indexed, then the question is almost a simple question of math. The $100K is 5% of $2M, so if you can get a better return than that then the lump sum is better...QED.

If you are younger than 65 then the amount you can draw each year will be lower because you'll need to stretch it out longer.

Let's assume that the amount is indexed to inflation, because that makes the most sense (to me, at least). If you were, say, 30 years old, then the annual amount from the capitol might be as low as $20K in order to last your whole life. In that case you be better off with the annual amount.

If you are older, then it becomes more and more advantageous to take the lump sum, and the two amounts are probably equivalent at around age 60.

Finally, there's risk. With a lump sum you are at the mercy of the markets and your investment decisions. With the annual amount, the risk is involved with the entity issuing that payout. If it's a government entity, depending on the country, it might be way safer than some private company.

[Edit: Really bad error fixed. $1M at 65 is worth $60K/yr, not $100K/yr]

The average return on investment from stocks for the last 150 years is around 9 to 10% worldwide. That includes a few world wars and pandemics.

In the US, Canada and others, only half the money made in that way is taxed.

2 millions would net you 180-200k a year and you'd pay tax as if you made 90-100k.

There should be a way to invest 2 million such that it generates more than 5% interest, no?

I'm thinking that the lump sum is better.

There's a chance you die and that 2 mil will go to someone else vs your payments just stop.

The 100k isn't matching inflation so you gain less wealth every year versus your potential 2 mil investment matching or beating inflation.

I think the only real reason to do the 100k a year is if you're not very financially responsible. Which has been the case for many lottery winners.

Edit: Personally not a fan of hoarding wealth outside enough for retirement/security.

100k per year. Stability is a nice thing, plus I believe I still have more than 20 years to live. Plus who knows what science will present us in the foregoing decades.

100k a year please. I'll send you my bank details in a PM. Thanks!

It's a tricky one with pluses on both sides. 100k a year is enough to live a really nice life, plus I'd carry on working. I'm likely going to live long enough that I'd earn way more from it.

BUT. I'm middle aged, I'm not 20 with my whole life ahead me. I absolutely may not live long enough. If I take the lump sum, I can invest it etc and get long term successes.

I'm taking the sure thing, lump sum it is

100k a year for me. I don't want to work and I don't want to buy a mansion and sports cars or anything either. I just want to be able to exist and do whatever the hell I want with my own day. I want to be able to spend today working on some creative project, tomorrow not leaving my bed, the day after going out to movies etc.

Basically to do whatever, whenever, without needing to cut my hair, put on a uniform, put on a fake smile and pretend that I'm actually fine with spending 90% of my life in some office or workshop ensuring that the boss gets another Mercedes Benz this year and can send their kids to study overseas.

100k a year would be great. I could rent a flat in the city somewhere, get a scooter or something, or just keep walking and using public transport. And have the money to buy that cool jacket I saw in the second hand store, or go out once in a while and have a social life, or save up a bit and pick a new country to go and be a tourist in every year.

I wouldn't say no to the 2 million but I think I'd just prefer having the guaranteed income for life.

The average interests from 2 million invested into the stock market would pay out 140k a year but that would still be affected by the volatility of the stock market itself. I'd probably go with the 100k a year of stable income. That would already be more than what I need. I can live comfortably with half of that.

Just get the 100k and invest 20k a year, and use the rest for your life. Then contribute to FOSS forever

This is basically a lottery lump sum question but worse payment stream and better taxation (i.e. no taxes!). It is generally already better to get the lump sum in lottery payouts assuming you don't spend it all in a few short years. The same would apply here

There’s a well established mathematical answer to this and I would post it if I wasn’t lounging in bed. It comes down to the “discount rate” of the annuity ($100K for life) and the length of the annuity (so you’d have to consider your personal health and consult actuarial tables or whatever to estimate your anticipated lifespan). You just compare the discounted future cash flows of the annuity to $2M.

Fixed income mathematics is pretty cool, IMO.

2ed option, and gamble it all like crazy every year

I'd probably make 2 million pretty soon like that

If I were younger I would take the $100,00/year. But it would take 20 years to equal the $2mil. I would rather take the lump and invest it now.

2 million now. Unlikely I'll live another 10 years, much less 20.

I'd gladly take either of those

2nd option please. Thanks

$100K/yr.

Yes, with inflation it won't go as far in subsequent years, but it doesn't say anywhere that it's the only source for your income, so you can make more money in other ways, like starting a business or investing some of that $100K in a low risk investment plan that will help you later.

I'll most likely live long enough to see the $100,000 a year surpass the $2,000,000, so that.