[quote=SK in CV]I’m not assuming anything other than the facts presented. Pension v. 401K. Both private and public retirees could have other assets or no other assets. There’s really no question that the 401K provides greater flexibility. The pensioner can’t decide to skip distributions for a year, or reduce distributions in order to reduce taxes. [/quote]Of course 401k is more flexible. No one is disputing that. We’re debating which one has more value over the retirement life. I go for pension. You might get the flexibility of 401k but you’re at the mercy of the market. Pension on the other hand is slow and steady and predictable. Tortoise and the hair?
[quote=SK in CV]
Most of this doesn’t matter. I was only comparing pension v. 401K at retirement age. How it happened is incidental. I’m not sure what the 2.5% growth is you’re referring to. SD cops pension COLA’s are capped at 2%. And their average pensions are under $65K[/quote]Here is one document. I was talking about SD police, since I don’t have that number. I’d take your word for it and say it’s capped at 2%. It doesn’t change the calculation all that much when, even if you account for 0% COLA, the pension number still look more lucrative compare to $3M in 401k at 55.
[quote=SK in CV]As I said, the COLA’s aren’t 2.5-3.5%, they’re capped at 2%. And the assumption was not death after 30 years, at 4% it lasts over 38 years. And you overestimate life expectancies. 80 may be the new 70, but 100 certainly won’t be.
If you win the lotto, are you going to take the annual payout or the lump sum?[/quote]
Again, real life experience doesn’t pan out the way you expected. I just gave you an example of a retiree in 2000. If you’re in the private sector with $2.4M in 2000, you’ve already blown through $1.2M and you’ve seen 0% nominal growth. Do you expect the remaining $1.2M will be sufficient to last for the next 18 years? This is comparing $100k draw down like a $100k pension. If you count in the exact draw down of the pension, i.e. $100k for the first year + COLA each year after that. The remaining $1.2M would look even more abismal.
WRT to the lotto question, how’s that any different than your original question of whether I’d take $100k/year or $3M lump sum? My answer is still the same. I’d take the annual payout. This is assuming I win the lottery at 55 and not at my current age. If it’s at my current age, then I have more than enough time to ride through the peak and valley, so I’d take the lump sum.
