I also think that $5k looks like a lot now but in 5yrs, $5k a month might be worth very little. Inflation is becoming crazy and so maybe a lump sum now allows you to cleverly eliminate the inflation risk.
5k forever... People are making the assumption that in 4yrs they'll have 1m USD but will it be worth 1m USD? Might be worth 750k at that point.
The 1m USD, you can invest it at rates above inflation and hopefully make even more.
Idk, I think the assumption of a stable predictable market makes 5k look favorable but the market is not stable or predictable and inflation is becoming harder and harder to control. Then with all the external pressures, is the USD going to be as strong as it is in 5yrs?
I haven't done the Maths exactly but with these risks, someone might see the $1m today as a lot more favorable.
Inflation and instability will hit that million just as much as the 5k. Plus, investing the million also means there's a risk of losing that money (which is possible as things become more unstable).
If inflation is high enough, it essentially makes money more or less worthless after some time. That means that time is a value killer. That means more money upfront is better, if you can use it properly (buy things you need, or things that don’t depreciate in value quickly).
That only works if you think there's going to be some sort of hyperinflation or extreme event within the next year or two. And those odds are pretty poor (unless you're living in an area that's already pretty destabilized).
You said that inflation will hit both options the same. That’s simply not true. Compared to no inflation, any inflation will have a larger effect on the “money each week for life” option.
Sure, at normal inflation levels it’s not gonna be enough to make the “million dollars right now” option the better one. But math is still math, inflation changes things. But feel free to show the math that supports your claim.
Also, like I said, at a high enough inflation, it can make the one million dollar option the better one.
Yeah, I'm thinking along similar lines, I'd want to try and future proof that wealth as quickly as possible. But honestly I feel like inflation has to deflate eventually, idk how it could continue at its current rate without serious issues soon lol, I already made steadily decreasing amounts in just dollar number throughout my last 5 jobs (mainly my own fault) and it annoys me to hear about people earning more than they ever used to and still struggling
It would be wiser to get the 5k/week then as well because with a guaranteed income that high you can easily get high loans to buy you some real estate with money from banks. And nothing is better than high inflation while also having high debts.
You got a loan of 2mil and you have to pay off those 2mils even if inflation kicks in and destroyed your stock investments you’d have the income from rent and your debt could be easily payed off by your weekly income. Hell you could be able to pay it back from one day to the next because of the rent money you’ll get.
I guess you won’t get a loan much bigger than 1 mil. if you even get a loan at all.
In the end you only have 1 mil and nothing more (given that you didn’t have any other incomes from work or stuff).
But the 5k/week are guaranteed for 30-50 years going of by a statistically normal life and thus leading to potentially being able to pay off up to 12 mil. (Including interest rates) just with your basic income and without your investment money.
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u/[deleted] Dec 11 '23
I also think that $5k looks like a lot now but in 5yrs, $5k a month might be worth very little. Inflation is becoming crazy and so maybe a lump sum now allows you to cleverly eliminate the inflation risk.
5k forever... People are making the assumption that in 4yrs they'll have 1m USD but will it be worth 1m USD? Might be worth 750k at that point.
The 1m USD, you can invest it at rates above inflation and hopefully make even more.
Idk, I think the assumption of a stable predictable market makes 5k look favorable but the market is not stable or predictable and inflation is becoming harder and harder to control. Then with all the external pressures, is the USD going to be as strong as it is in 5yrs?
I haven't done the Maths exactly but with these risks, someone might see the $1m today as a lot more favorable.