still wouldn't work out better than investing the 1mill and carry on working.
Poll: Poll: The £1000 a week for life or 1million lump sump....
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Seriously, very little savings? I'd live in a slightly better way than I do now if you gave me £1,000 a week and I saved £500. If I kept working at my current job, I could save £750 a week plus take home an extra £1,000 a month, raising my pay from £1,500 to £2,500 a month while saving £3,000 a month for a deposit. It wouldn't take long before I'd saved enough. The more cautious could even save all £4,000. Either way in 4-6 months you've saved somewhere between £12,000 - £20,000 without any hardship. That's a sizable deposit assuming you're not interested in a status symbol of a house or stupid enough to live in London. After which I'd go part time to give me some focus and structure live in my bought house paying similar amounts of money to the rent I pay now, and have a very comfortable lifestyle.
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Are we talking about CAD or GBP because the prize was CAD 1000 and when I refer to the girl in question then I am considering the prize money in CAD.
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I was talking GBP, not CAD because the OP used £, not $. I've no idea how far $1,000 would go, and you are right that might influence my decision though if $52,000 a year is not going to allow you to save a deposit fairly quickly then $1m isn't going to last long either
$1000 cad is about £500, neither value should change your opinion. lump sum is better. lump sum is going to last a very long time as you invest in.
If you want to match the $1000 per week from investing the $1M, you need a 6.5% return on your investment. (just under 5.2% to match the $52k annual + extra 1.3% because you get taxed on the interest - assuming a flat 20% tax rate, realistically it would be more complex than that)
That only matches the weekly payment figure (you earn $52k interest per year and withdraw $52k living expenses) so you'd need a couple of percent more on top to match the inflation too.
At a guess, you might need 10% ROI to ensure you can take living expenses off the interest but also leave enough to build your investment. Certainly possible but not as easy as people are making out.
Average yield from rental properties in uk is just over 4% before tax + maintenance costs.
This is what I would do anyway. Take the lump sum and spend most of it on a house for myself whilst continuing working.
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A lot of people in here seem to be pointing out that CAD1,000 is only about £550 but then forgetting (or conveniently ignoring) that CAD1,000,000 is only about £550,000.
I ahvent seen one single person make that mistake.
£52k/year with £1m in the bank ≠ £52k/year with very little in the bank. The comparison isn't at all reasonable.
Bringing inflation in to the equation is odd too. Yes, it's important, but not in the context of a comparison against a £52k/year fixed income.
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https://forums.overclockers.co.uk/posts/31701889/
That post is the most blatant. But there are a fair few others which say things along the lines of how little £550 a week is.
I don't read it as that. Two sentences separated by several enters.
The main argument most people are putting forward against taking the weekly payment is that inflation will mean it is worth less in future so it's not odd at all to address that.
If you want to live off the interest of the $1M then that money will devalue at the same rate that any other money would. The lump sum in the bank will also devalue.
Obviously if you let the interest compound then you'll outstrip inflation and end up with a lot of money but then you can't spend any of your money.
Not at all the one million can still increase, property/shares whilst still making an income rent/divedends just as two easy examples.
Yes, that's what I said in my last post.
but you'd need about 10% ROI to be able to spend the same ($52k per annum) and still grow your investment. Possible, but not "easy".
If you wanted to spend it all and no savings, in which case inflation kicks in and you are screwed. The lump sum is just better what ever way you cut it.
How are you getting 10%?
Inflation is universal. Your $1M isn't magically immune to it.
If you spend $52k per year, you'll spend the entirety of your weekly payments if you make that choice or the entirety of your interest earned if you choose the lump sum (assuming you can't get more than ~10% ROI).
Your weekly payments will never go up or your lump sum will never accumulate. Inflation will devalue both by the same amount (93% over 50 years seems to be the popularly quoted figure in this thread).
Yes, you could spend less than that $52k and invest the rest but you can't say that in one scenario "you are screwed" because if you spend less than $52k, you'll have extra to invest in both scenarios.
You are getting very confused.
The 1mill has been invested and going up at least with inflation and likely more( house prices historically out strip inflation), you are then also getting an income from the profits for example rent.
So no they are not the same. One is affected by inflation and you can do essentially nothing about it
Average yeild on uk rental property is 4.17%. Thats before tax and maintenance costs. You'd be looking at almost half the income you'd get from the weekly payments doing that.
By the time inflation evens that out, you could have a significant amount saved/invested from the weekly payments.
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That still doesn't work Out, the amount saved that has had inflation at work on the payments. Unlike the lump-sum, and you still have access to the lump sum. It also depends on property and location. It's more like 7% which even after fees and costs isstill a damn goodwife and still works out better than weekly amount.
If you look back someone has already done the maths.