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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]If scenario #1 is a lifetime annuity and scenario #2 is based on an investment balance, wouldn’t it also depend on how long you line?  (Not that anyone can predict that.)[/quote]

Yeah it might not have ben clear but scenario #2 I had the protagonist purchase a lifetime annuity at age 62, using the IRA money[/quote]

One source of risk is market returns. I agree 2.5 percent real is conservative, but I wouldn't be surprised if future returns were much lower than past returns. The last 50 years were atypical for many reasons.

But the other question is what the annuity will cost you at age 62, which will depend on changes in life expectancy and on prevailing interest rates.

Personally, I would take the annuity. $5K/year guaranteed is a nice fallback to have, especially as, if the new job were in the private sector, your post-government retirement savings will give you plenty of exposure to the market.[/quote]

NP here - Spoken like a true government lifer. No one who gets #s would hold onto a 5k annuity and let 22k just sit with the government for 27 yrs. Take it and grow it. Sure returns may be lower going forward, but they've been at 9.9% (with dividend reinvestment) since 1965. Even accounting for returns being cut in 1/2 or being cut by 2/3, you STILL come out ahead. And BTW how nice of a fall back is 5k/yr -- with the purchasing power of about 2.5k/yr. That $200/month is not going to make huge differences for you esp 27 yrs from now when everything is more expensive.[/quote]

I am an economist, so I like to think I understand numbers. I can give you many instances where real market returns have been below 2.5 percent over 27 years. Not from the US, but from other countries. The kind of countries that would have a senile lunatic as their President. Of course, it could never happen here...[/quote]

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