Current Events > $20 million now or $3k a day for life

(+) Yeah! (+)

$20 million no tax one time payment.

$3k a day for the rest of your life untaxed, adjusted every year for inflation and can be left to only one dependent when you die. They cant leave it to anyone when they die.

Whatever you choose will be direct deposited to a new account which is invulnerable to fraud, identity theft, closing down etc. even if someone stole your card and all your info it would be impossible for them to take anything. Whoever tries will instantly die. Of course others can use it with your permission.

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Unless you're really old or need a lot of money right this second, 3K is the better option. You'd be making over $1m/year for life.
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20 million easily

you make 20 mil after about 18 years with 3k per day
3k per day is 1.1 million per year
1.1 mil would be a 5.5% yearly investment return on 20 mil

so, again, 20 mil
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365 X 3k= 1,095,000 Say I live to 85. That is around 52 more years. So 1,095,000 X 52 = 56,940,000... Yeah I would say that is a easy choice.

TheGoldenState posted...

20 million easily

you make 20 mil after about 18 years with 3k per day
3k per day is 1.1 million per year
1.1 mil would be a 5.5% yearly investment return on 20 mil

so, again, 20 mil

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20 mil easily
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3k

It would keep me from fully buying a bunch of exotic cars and I would make payments on land and leases ect... It would keep me from blowing too much and make smart decisions.
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3k.. I can see myself doing something stupid and blowing the 20 mill.

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Daily money would be nice.
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3k. Temptation to blow too much isn't there and don't have to worry about/rely on investments and such so much.
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Tenmyouji posted...

3k.. I can see myself doing something stupid and blowing the 20 mill.

Yeah, I think I would get way too loose with the spending and wouldn't notice until I had whittled it down to almost nothing.

3k a day should be more than enough for anybody, tbh. I think I would have trouble even spending that. It would be nice to be able to power through paying down loads or a mortgage though.
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JustMyOpinion posted...

If only there were a way to get a return on that 20mil.

I don't want to waste time worrying about investments.

3K a day would be game changing. It's basically all I'd need to get by.
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3k
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metallica846 posted...

3k since you can pass it on.

Wait you can't pass the $20m on? Or is it saying the annuity stream of $3k per day can be passed on?

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Jetblackmoon posted...

Unless you're really old or need a lot of money right this second, 3K is the better option. You'd be making over $1m/year for life.

If you invest smart that 20 million can grow and earn more per day then the 3K a day.

That said the adjustement for inflation is nice.

Even if there is hyperinflation inflation you ste good. Will get your billion dollars a day so you can buy that 1 million dollar loaf of bread.

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GregShmedley posted...

Literally no reason to go with the $20 million.

Especially considering this.

Have to admit, the adjusted for inflation bit definitely sweetens it alot since it's risk free vs. investing the $20m.

Whilst I could do alot with $20m (investment wise) I also feel it opens me up to a lot more issues having the lump sum whereas having a steady stream of $3k deposits daily and just letting it pool together/earn interest/etc will also tide me over.

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Hm. It's not as clear cut as it seems. 20 mil now would probably be better long term if you're smart about it, but honestly just having 3k each day guaranteed that I can pass down is very tempting.
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TheGoldenState posted...

20 million easily

you make 20 mil after about 18 years with 3k per day
3k per day is 1.1 million per year
1.1 mil would be a 5.5% yearly investment return on 20 mil

so, again, 20 mil

This. It's also why lesser one-lump lottery sums are better if you're halfway intelligent with your money than having it doled out for the rest of your life.

If you take the doled out amounts, you're essentially doubting your own intelligence and willpower.
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K181 posted...

This. It's also why lesser one-lump lottery sums are better if you're halfway intelligent with your money than having it doled out for the rest of your life.

If you take the doled out amounts, you're essentially doubting your own intelligence and willpower.

Most of the wisest decisions of my life have come from me doubting my own intelligence and willpower.

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Mathematically it's probably better to take the lump sum, but hard to ever go broke with a daily annuity. So $3k a day for me.
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3k fam
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K181 posted...

This. It's also why lesser one-lump lottery sums are better if you're halfway intelligent with your money than having it doled out for the rest of your life.

If you take the doled out amounts, you're essentially doubting your own intelligence and willpower.

I agree with your logic - but unlike the lotteries where it's a lump sum or the same lump sum amortised over whatever number of periods (i.e. it's an equivalent amount), the 2nd option here is more similar to an annuity or potentially even a perpetual annuity. I suspect these are not an equivalent amount to the $20m at day 0 since presumably the TC picked an arbitrary number for this hypothetical.

That being said, maybe it's worth doing a quick valuation...

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$20 million. 3K might be better in the long run but I don't have interest in making more. 20M is more than enough for me.

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CADE FOSTER posted...

TheGoldenState posted...

20 million easily

you make 20 mil after about 18 years with 3k per day
3k per day is 1.1 million per year
1.1 mil would be a 5.5% yearly investment return on 20 mil

so, again, 20 mil

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This ended up eating at me as I was deliberating over which option to go for.

I did some back of the envelope calculations, assuming 100 years (50 for me + a further 50 for my child since you essentially are trying to calculate how many more years after you die since the time you're both alive is served concurrently). For anyone wanting to reperform my calcs, 100 years = 36525 days.

Basically using the annuity formula for 100 years, Excel's goal seek has told me that 5.6025% is the breakeven point where a discount rate of LESS than 5.6025% will mean the present value of the daily annuity is worth more. A discount rate MORE than 5.6025% would mean taking the lump sum is the better option.

Then in debating over what discount rate to use, I have oversimplified this a bit but to cater for the inflation adjustment to the payments, you would deduct that growth rate from the discount rate used - or if we're working backwards, add it back on to the 5.6025%. Assuming the inflation rate is 1%, then it would be 6.6025%.

Based on this, if you're able to beat 6.6025% consistently in your investment returns, go for the lump sum. Otherwise take the daily payment.

Most savvy investors would scoff at 6.6% as an easy target but remember this is consistent and a risk-free return more akin to a US Treasury bond status or (pre-GFC) Fed guaranteed bank deposit.

If you play the flipside and work on an assumed discount rate, say 1.5% to reflect time value of money and build in the inflation adjustment feature, that would have a NPV of $56.529 million (i.e. above the $20m lump sum option).

Hopefully my sleep deprived brain at 11pm hasn't mixed this up though.

Excel formula
=C20*(1-(1/((1+D19)^C18)))/D19

C18 is number of periods (or days in this case)
C20 is payment per day
D19 is the discount rate adjusted from annual to daily

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3k/day would be more fun

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Making 3k a day means there's absolutely no risk of over-spending. You'll always have money coming in. Getting $20 million is gonna have repercussions down the line when you buy a $5 million house and $1 million car and can't pay the property taxes in 10 years because you spent your money.
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3K is the more sensible choice. Like others have mentioned, it would keep my perspective relatively grounded and I wouldn't blow a chunk of it on some dumb shit, or dumb investment.

Plus, there's the safety net in that it's lifetime, instead of the one time 20 mil. I don't have to worry about running out of cash, ever. I don't have to worry about being homeless, running out of food, not being able to pay bills, ever.
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You guys know how investing works, right? Even at 5%, which is modest, that $20M is producing you $1M a year in interest. That's objectively the right answer.

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The Admiral posted...

You guys know how investing works, right? Even at 5%, which is modest, that $20M is producing you $1M a year in interest. That's objectively the right answer.

True, but in the current economic climate, a 5% rate of return is not as easy (from a risk perspective) as it once was.

I recently found some bank deposit slips from about ten years ago where I put $50k of my savings into a term deposit at 8.88% for a year, and another $50k at 8.25% for a bit longer. Those were government guaranteed deposits too (so essentially risk-free). How times have changed in a decade.

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Gobstoppers12 posted...

Making 3k a day means there's absolutely no risk of over-spending. You'll always have money coming in. Getting $20 million is gonna have repercussions down the line when you buy a $5 million house and $1 million car and can't pay the property taxes in 10 years because you spent your money.

I guess if you have that serious of a spending problem, then sure, rationed cash could be a better option.

But it's really not hard to just write up and stick to a budget.
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The Admiral posted...

You guys know how investing works, right? Even at 5%, which is modest, that $20M is producing you $1M a year in interest. That's objectively the right answer.

Yes, but one could also go broke before even a year. Hard to go broke with the daily annuity.
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voldothegr8 posted...

Yes, but one could also go broke before even a year. Hard to go broke with the daily annuity.

You can purchase a $20 million annuity that would pay you more than $3K per day if that's the worry.

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The Admiral posted...

You can purchase a $20 million annuity that would pay you more than $3K per day if that's the worry.

But would it have the same features and risk profile as the TC hypothetical?

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20 mil.

I buy up all the apt complexes in town and would be making about 2.7m a year and still have 10m left over.
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Jetblackmoon posted...

Unless you're really old or need a lot of money right this second, 3K is the better option. You'd be making over $1m/year for life.

What if you die or something tomorrow
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JBaLLEN66 posted...

What if you die or something tomorrow

The hypothetical instrument allows it to be transferable to one other party (a dependent) and it's a single transfer only. In other words it's the maximum of:
a) your remaining life expectancy (if you do not have dependents and will not have dependents); or
b) your remaining life expectancy + the remaining life expectancy of your longest surviving dependent (from the date that you die)


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$20 million now is way better. You can invest it and get way more money than youd have with the other option

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I know exactly where to throw my money at with $20 million. In fact, I'd take $5 million and let you guys go with the rest (okay not really).

The $3K a day option is a terrible idea. The purchasing power of $3000 in 2019 is worth less than the purchasing power of $3000 in 2009, which is worth less than the purchasing power of $3000 in 1999. Inflation is going to devalue your wealth. So take the lump sum one time and learn to invest and maintain your wealth. And with the Fourth Industrial Revolution coming, every nation is researching Distributed Ledger tech (blockchain and the like) to back a new stablecoin that would be the new world reserve currency. If one rises and is hopefully not Facebook's libra coin, the US dollar could very well collapse in value.
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20 million, because I can solve all immediate problems, invest, and won't blow huge chunks like an idiot.
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People acting like they can't make investments off the 3k a day.

3k a day for sure.

It's the more stable sensible choice. You will have more time to figure out your investment strategies and less upfront money to spend frivolously
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3k a day and I'll still be able to work if I wanted to
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The 1 mil adjusts for inflation is something. to keep in mind

Er, the 3k daily/~1 million yearly I mean

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Bossdog421 posted...

People acting like they can't make investments off the 3k a day.

3k a day for sure.

It's the more stable sensible choice. You will have more time to figure out your investment strategies and less upfront money to spend frivolously

F/P > F/A, lol.
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20 million so I can invest it plus I cant assume Ill live another 20 years so it makes no sense for me to take the 3k a day