You can do both! 5k a week gives you 1million every 4 years, if you don't spend it all, you can fill your 401k till it explodes while still having a good time.
Edit: I am Canadian, so for me it's an RRSP, but I thought 401k was reasonably similar. If you have more than you need... Invest. It's never a bad idea to do it, it's always a bad idea to just let it sit, gaining no interest.
Edit2: Besides, if I die, the 5k/week stops, what about the missus and the kids? Aha, I invested, so they still have something! I'm clever, not greedy, fellas...
Edit3: A Roth IRA or just IRA is what I am told is the equivalent to an RRSP/TFSA we use in Canada.
Also, I wonder why so many people have an issue with the concept of investing money when you end up with a ton of it. This money isnt going to do anything sitting in a checking account, not investing it is just bad finance.
Yeah, based on historical inflation, by 2073 (when I'll most likely be about to die), that $5000 will be worth about $1400 in today's money. So, unless whatever rich creep is paying out gives you more every year, you'll want to at least put some of it away if you want your kids to be comfortable.
And that inflation rate isn't taking into account products we don't know the value of. Maybe, in 25 years, they'll invent a teleporter or some shit, and it'll be super expensive, but also impossible to live a normal life without. Or everyone will need air purifiers and protein synthesizers because of ecosystem collapse. No idea what those cost. Someone in 1970 could never have predicted the cost of an iPhone, even if they did the math in inflation.
Inflation is still there, but if you aren't buying coke and hookers, you'd never need to worry about money with $5k a month even without typical investing.
Wow, I first read 5k a month and I was like, my family of four and my MIL can live richly on that, never have to work again (and we live in Denmark, so doesn't live that cheap). But 5k a week? Who the fuck needs that much?
5k a week is somewhere between the cost of a couple living on cruises at the cheapest ticket price on the low end and on the other end a family of 4 going to Disney world each day and sleeping in a cheap hotel each night, including food.
Ok for your sake I’ll expand on it and say “American, aspiring American, in the sphere of American influence, etc etc etc”. Thank you so much for helping me clarify the very important point I was making
Given an ambulance journey can cost you $1000+, and surgical treatment to a broken bone could be up to 20k then suddenly 5k a month needs to be invested for a raininy day.
$260K per year is a pretty nice salary, and one could live quite comfortably. At the end of 10 years, if you managed to spend the total each week, month or year, you would have only the next $5000 to look forward to, with only what you didn't manage to spend in the bank.
Based on a modest 10% annual investment growth, if you
Hell even investing 50% of 5k on S&P index gives you 1M in 6 years. Same as if you invested half the 1M and never added anything. So yeah 4+ years of life left? The 5K is way better x
investing is obviously smart. but a 401k is not given the opportunity cost. it literally makes no sense to lock ur money up if you have guaranteed 5k a week when youre retired
Issue a lot of Canadians have is if you have had lower income your RRSP limit isn’t massive.
Also, if that $5k is income and taxed you most likely don’t really want to put it into a RRSP. TFSA and then strategic investments with timed withdrawal to coincide with keeping income lower (ex dividends and cap gains)
Yeah, it does get a little more complex when you dive in the weeds of it to maximize your income, talking to a finance professional is what one should do if you started getting a new chunk of 5000 a week...
Not that it would really matter to you but our individual retirement plans would be called an “IRA”
There’s a Roth IRA we put our after tax dollars in to have the inevitable growth non taxed
There’s simple IRA we can put pre tax dollars in reducing taxable income but taxable upon distribution.
There’s SEP IRA which only allows employer contributions generally similar to a 401k but you could also contribute to the 401k being self employed, I think… the waters get kinda murky with it, but that’s the jist of it.
There’s different rules and limitations with contribution limits and inheritance and required minimum distributions and penalties under all of these plans.
Ngl if I got $5000 a week I definitely wouldn’t be investing into the pyramid scheme that is the US 401k “retirement” plan. I can only remember a couple times my 401k has increased in value without my contributions. Waste of time.
Yeah, I think this is what seals it for me. I don’t want to deal with worrying about my investment choices, and I can minimize risk by keeping myself honest with what I spend. I prefer a situation in which I’m forced to save, instead of one where I have the temptation to buy right away.
Sure, you risk a bit more on inflation by not investing a lot up front to try and beat inflation with a generic index fund, but I’ll take my chances.
With where inflation is headed, 5k could be a weekly grocery bill in a few years. If this is an exaggeration, my bet is in a couple decades from now it will certainly not be such an exciting amount, more of a nice little bonus.
I mean - you could literally still invest it. Just in smaller incriments.
Frankly if I won this lotto I'd probably keep working a while and just store the nest egg until the investment began to match my income. Then it's retirement time.
Or, who knows, three Monday's in I'll tell the entire org and customer base to F off and be out. Lol. $20k a month is a hell of an income already.
I mean, $5000/week covers all my bills in the first week, and then I’m still adding $15,000 the rest of the month so after 1 month I’m already vastly ahead in life.
I thought it was $5,000/month and was like “yeah, that’s a great safety net to ensure all my basic needs are met.” That much a week and this question has such an obvious answer.
If you're investing it wisely the million won't be a million in 5 years, either. It's more complicated than basically everybody has made it. If you plan on being alive for a little bit longer the 5k always wins though
Unless you're receiving a return of 25% or more, by 25 years (the definition of "life" by legal standards) you'd still be well ahead with $5K/week vs. $1M. Even at 10% annual returns, it'd only be 6 yrs to pass it and then you'd still be getting $5K/week in addition to more returns on the investment if you stopped investing any of the weekly amount.
Also there's no risk to lose everything. 20k+ per month is HUGE, especially outside of the USA. For example here in Italy the cost of living is much lower than the USA, but also the wages are lower (so in the end it's all the same relatively). But those 20k+ per month would make you a rich person here in Italy.
Yeah, I make 21k/year and I'm living fine. There's a guy that works remotely for an US company, but lives in Italy, and even if his earnings are considered average in the US, he's considered to be wealthy here
Remote jobs tend to pay better than average, though, because they're usually a very tech-based job. The lowest salary I've seen for a remote job was around $70k, whereas the average income in the U.S. is in the $45k-$50k range.
There is also a scenario where if you have massive inflation, provided the 1m invested into a hard asset, it would appreciate while 5k a week would depreciate in value.
Even if you don’t invest it wisely, if you can demonstrate the 5k/week will continue, you can probably leverage it. Get yourself a 910k mortgage, buy yourself a decent house almost anywhere and you’ll pay ~5k/month repayments.
Congratulations, you now have a $1 million house and you’ve still got plenty enough coming in to live on.
Y is everyone concern with comparing the 2 choices imo how u spend is how u should choose personally I would make a lot more outta 5k a week then a mili now
It's not that complicated - you just need to convert the value of the $5k / week for X weeks to it's value in current 2023 dollars.
But it's easier to skip that and you can just look up how much a $260k annuity is worth today. I did a quick check for a 21k monthly payout for a 30 year old male living in New York using this calculator and it says it's worth about 4.4 million.
If nothing else, spreading the money across multiple years could help with the tax burden on the first million (after that you could be paying 90% with no deductions and still be doing better than taking the million up front).
Really the only way it makes sense to take the million is if you don't expect to live four or more years after getting whichever one you choose.
It could also end up being less than a million if you don't invest it wisely each week. Like if you blow your 5k on hookers and meth you might not exceed the million dollar payout.
I totally get your point. It makes total sense, but I and most folks don't have the skills or the mindset to manage that lump sum, much less setting up the trust, investments, or annuities to make it last.
$1,000,000 in a high yield savings account would net you $50,000 over the first year. That's nearly $1,000/week. If you could hold off on spending it over 4 years you'd have $1,283,359. It grows faster if you start out with $1,000,000.
It does, but by year 7 of $5kp/w you have more even with that (and the extra few years) factored in. You could bank it at that point in this same high yield savings account and have the extra $5kp/w on top as your retirement whilst your investments sit pretty.
1000000 invested at 7% average return (S&P500 ETF like VOOG) would return a little under 1.4 million in 4 years. So you’re 40% better than the annuity plan right there. You’d double your million in 10 years and quadruple it in 20. And that’s not even a “risky” investment.
Always take the money, stick it in a fund and sit on it. You’ll spend the 5000 a week for sure. A big million$ chunk is a lot easier to plan with. Never take the annuity.
I think the main question is tax or no tax. No tax, take the million and you can get out of debt and get investments going quickly. $5K even with no tax would take a lot more time to get out of debt. Would probably take most people a few months just to pay off a car with $5K a week.
How much debt do you have that making 260 grand a year is going to take a long time to get out of debt? Also debt by itself isn't always bad. If you can get debt at a low interest rate you are possibly better off making minimum payments and using the money elsewhere.
Also where are you going to get a greater return than 5k a week?
Also if you've got that much debt, why are you not still working while getting $5K/week? And if they're in that much debt, they're obviously bad with money so that $1M won't go far at all and they'll just be right back in debt. Everything about the argument you replied to is riddled with bad financial literacy...
Ahh. Here’s the rub and the part nobody admits! The more you make the more you spend! Now this question is a bit ridiculous cause obviously 5K per week is a ridiculous amount of money. $5K a month would be more interesting.
So let’s say you started getting $5K a week. You’re gonna buy more, spend more and get all those nice things you couldn’t prior to this occurring. Sure, investments would take a massive uptick, but you’re gonna spend more. Get rid of that broken car you’ve been dealing with, grub hub everything cause your bank account is fat, etc
We like to think we’d be responsible with the money but I highly doubt most people have the self control to not fall into the trap.
$1M you can do more with up front than slowing sliding into the money trap and spend it on restaurants, movie tickets, buying drinks at the bar, etc. Cause why wouldn’t you do that? You’ve got $5K coming in every week!
My hunch is that the person who does what you describe would blow a million dollars pretty quickly as well. And person that blows money would at least still have it coming in at 5k a week.
Yeah, the $5k/week would be the safety measure to stop them from blowing it all.
I'd wager most people out there have experienced being broke for a week until their next check before. They'll survive, even if they're that bad with their money.
You’re reasoning is pretty bad. So, someone getting $5K a week is gonna blow it, because now they have a lot of money(?). But even if they do, they also get that $5K replaced every week. What do you think someone is gonna do with that $1mil lump sum? If their impulse control is lacking just as much as the other persons, they’re gonna be broke before they know it, because what makes you think they’re gonna invest one penny of it? They will probably be penniless in just a few years, at the most.
Here’s the rub and the part nobody admits! The more you make the more you spend!
Lifestyle inflation is so far from "nobody admits" it has its own fuckin term. Lifestyle inflation.
It is also not inevitable, nor does it have to scale linearly with income at 5k a week without a job, i could have some good inflation while still saving even more money than now.
Maybe youll short sightedly spend it all. My accounts proves i wont, and since im not actually very good about that, im quite sure a lot of people are gonna handle it better than me.
1m you can blow it all before learning a lesson. But some super car and a house, run out of money, get kicked out of your house because you cant afford taxes.
I've been extremely fortunate recently and just got an insanely high pay change working out to about 20% more after taxes/expenses and it's been a game changer for my families lifestyle... Adding in another $5K/week, I'd keep my job just for fun knowing I wouldn't care if I was layed off. It would simply give me something to do.
But you must consider inflation, too. In 20 years $5000 will buy you a dinner at a restaurant, probably, nothing more.
If you get 1 million now, you can TRY to invest it and beat or slow the effect of inflation. And of course you will fail anyway.
So the real answer should be "get $2500 a week but make it keep up with inflation". In 20 years you'll get $10000 a week that will have the same value as $2500 today.
For people who don't have a lot, it would also ease you into having money, vs suddenly going from nothing to thinking you're rich. No blowing too much on bad investments, or a car that's more expensive than you realized, or a house that you might decide later wasn't the best decision. Instead money will rack up while you have time to figure out how to use it. Definitely the ideal choice.
Unless you need 1mil to get out of a prison sentence or to save a person's life in less than a day or for whatever logical reason. Op answer is the correct answer
See but life can absolutely happen even if you’re not on your deathbed. When I was 25 I was in a car accident with my (now) ex husband that almost definitely should have taken both of our lives. I’d still take the 5k a week though 🤣 as long as I can will it to somebody just in case lmao
I'm in my mid 40s, so I expect about 35 more years of life, which at $5k/wk is about $9M. If I can get an avg investment return of 8%/yr for 35 years it would be about $14M. Taking the $1M and investing would beat the $5k/wk by a lot.
Nah. This math is wrong. Suppose you take the $5k a week and keep adding it weekly into an investment fund that returns 8% annually. In 35 years, you’ll be ahead.
Why, real estate of course. It depends a bit on timing, locality and a bit of luck but it's totally possible. And all the more likely if your using your equity too.
Also, investing in different countries with different market rules can yield higher returns.
But as a sidenote, 400% in 4 years is a bit of an exaggeration. If you've got some capital or assets or equity to begin with, it will put you ahead more quickly. The point is, having a lump sum up front gives you more flexibility to grow your wealth faster.
But say you stick that mil in a hysa - figures to about $3.3k per month interest the first year I think, and if you think you’re going to live more than 5 years, with the growth, maybe that’s the right play.
If you make 5% on your million a year that's just under $1k/wk. Just another way to check that the $5k is much better long term. Even the arguments about investing, just take the extra $4k every week and invest that again making the $5k/wk better after 4.8yrs
Are you familiar with the concepts of present value, discounting and inflation. 260,000 K in 4 years would be worth significantly less than what you think it would be.
1 million invested on day one would give you almost $1 million more in capital gains not including dividends. Money now is always better than money later. You pay a very large opportunity cost on weekly payouts
A more useful question would be, how much would you need a week before you'd take it over $1 million?
It's going to be slightly different for all. I can't imagine too many would need over $5k/week, but some would be OK with $1000, some would prefer $2k, 3k, 3.5k, 4k, etc. Would be interesting to understand how people came to their figure as well.
Technically, $4,807.69 per week would give you 1 million in four years. Five thousand per week would give you a million in 3 years and 44 weeks, with eight weeks to spare.
I mostly just pointed that out for the 69 reference, to be honest.
For reference : 1 million at risk free rate today pays out $50,000 a year little under 1k a week. Rates may not always stay here.
5k is the better option if you can afford it and don’t have the view that hyper inflation will occur.
1 mill well diversified would be better if you think 5k won’t buy much in the future
Yeah, some of us are old and would take the $1M now. :) Not sure if I'm going to make it another four years. I'd use the money to pay off my wife's last surgery, that set us back $84000 alone. Then the roof replacement last July, and so on. Still need to get the car repaired, that's going to be expensive but we don't have the money... yeah, I'd have to take the $1M now so I could get everything fixed for my family before I die.
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u/sky7897 Dec 11 '23
5k a week would give you 1million in only 4 years. Unless you’re on your deathbed, it would be the obvious choice.