iarwain <iarwain_8@[EMAIL PROTECTED]
> writes:
> What would you do in this situation?
> If you were going to retire in eight years, and you had an extra 4800
> a year to put toward your retirement, would you:
> 1) Put it toward your government pension? Leaving that amount in
> when you retire gets you an extra $400 per month for the rest of your
> life.
The current market value of such an annuity (ie. go to
<http://www.immediateannuities.com>
and enter the parameters -
for a 65yr old getting 400/mo starting right now for the rest
of his life, the value is approx $60,000).
If, as you say below, it takes earning 10%/yr over the
course of your 8 years of saving to build approx that
same value, you've found the breakeven rate of return
on your savings - ie. the rate of return you need to
make for the two plans to be worth exactly the same.
The difference then is this - what rate of return can
you *guarantee*? What's the value of the risk you take?
(also, what are the chances that annuity rates will be
higher in 8 years, on the assumption that you decide
to buy an annuity with the accumulated cash after that
point)
> 2) Put it in your 401k? That amount would give you $60,000 in eight
> years, IF you get 10% interest during that time (which may well be
> debatable at this point).
--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators
strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM
THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on
the
Newsgroup.
|
