On Mar 20, 7:07 pm, "Mark Freeland" <BnetOne...@[EMAIL PROTECTED]
> wrote:
> An income stream of $400/month, over 30 years (if N = 30) has a present
> value of $60K with a discount rate of about .585%/month, or about
7%/year.
> This means that if you expect to draw the pension payments for 30 years,
> then you'd have to earn 7% to exhaust your $60K in the same 30 years.
If
> you earned more, then you *might* come out ahead. (The might is due to
the
> fact that your earnings can fluctuate; if you start out earning little,
then
> you couldn't draw the extra $400 initially, even if, over time, the
earnings
> averaged 7%.)
I did the calculation a number of different ways and found the two
plans were fairly
close, depending on assumptions.
So a couple of other principles come into play.
One is the principle of "tax diversity" , that is as tax laws change
it might be
better not to have all financial eggs in the same tax bracket.
The pretax and posttax IRAs are an example. Will taxes be higher in
20
years when Democrats ravish the landscape and we need to pay for
boomers retirement? Or will they be the same or lower? Will pensions
and 401Ks be taxed differently? Will one fare better? Will one be
counted
towards SS/MC means testing, but not the other?
The other principle is financial simplicity. Having helped manged the
finances
of some ill people and assisted probates, lots of different retirement
accounts
may be a burden at times in life. I currently have 40 financial
accounts myself
include many related to retirement (ohers like the yearly newspaper
subscription).
I wish life was simpler.
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