[quote=AN][quote=SK in CV]I presume you think this somehow shows that a $100K pension is like a $3 Million 401K? It doesn’t.[/quote]
Based on the excel sheet I showed, assuming you live for 30 years, $100k pension at the start would be equivalent to $4.39M 401k if you stop investing and deplete it by death after 30 years. If you keep on investing, then you run into the risk of the $4.39M losing value but the flip side of that is you would make money if the market goes up. This is assuming 2.5% yearly pension payout increase. The number would be higher if you assume 3.5%.
Now, my math might be wrong. If it is, feel free to post your own excel data and show me where I made the mistake. I’ll gladly admit my mistake. Plainly saying “it doesn’t” won’t cut it. Just like the phrase you see at the bottom of this page “In God We Trust. Everyone Else Bring Data.”.[/quote]
So what you’re showing there is if the annual pension payments are invested every year for 30 years it will be worth that much? That’s not the same as retiring with a $3 million 401K.
For it to be equivilent to a $3 million 401K, you have to start with $3 million and reduce it every year by the $100K and add investment income. I don’t have to do the calculation. I know that 7.5% annual investment return will yield $225K a year without ever reducing principle.
But I did the calc. $1,250,000 with annual withdrawals of $100K on the first day of the year, 7.5% earnings will last for more than 40 years.
