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Lotterule
(lemmy.world)
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this post was submitted on 30 Dec 2024
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The usual math goes something like
Annuity: $2B paid monthly over 30 years is $5.5M/month; $3.5M after taxes.
Lump sum: $1B, $670M after taxes. Invested in index fund at, say 8%, can be expected to earn $4.5M/month, $3.6M after more taxes, which are lower for capital gains & dividends.
There's more complicated maths, if you want to model taxes, future values, and variable market returns, but they all say pretty much the same thing. They have to: the annuity works because They put the lump sum into escrow, pay a trustee to manage it well enough to pay the annuity and pay the trustee's salary. That means the trustee will invest said lump sum (before taxes) in low-risk, low-return assets, take his vig, and pay out the annuity from what's left.
I didn't think about risk management on lump sum vs annuity from the management side, that changes things.
Much better to take the lump sum, and manage it as aggressively or conservatively as you want. Unless it's government insured, and the government will step in to continue paying you if the fiduciary goes tits up.