Annuity payments when I'm 25?

Question

If Im going to receive annuity payments of about 2,000 dollars a month for the rest of my life when Im 25 years old, about how much is that all together. Is it better to have it all at once?

Answer 1

lump sum incurs large tax hit

annuities allow the holder of the sum to generate interest and is usually the best way to go about it.

Take lump sum if u can figure out a better investment vehicle with a higher return... such as jumbo cd's which u cna borrow against at a low rate (depending on brokerage who holds the account from which u purchase), or double 00 bonds that basically double after maturity.

or blow it on rims, dude!

Answer 2

If the annuity is indefinite, as the case would be here since "the rest of your life" is an unknown amount of time, the amount of the annuity would be the amount invested times a fixed return rate. To answer your question if it is better to receive it all at once, the rate of return would have to be known. If you can find out what that rate is, and you can do better on your own, then yes, it would be better to get a lump sum payment.

Lottery jackpots are often paid over 25 or 26 years (no interest), with an option of receiving about 1/2 the jackpot amount as a lump sum. That puts the return rate at slightly less than 3%. Most people can do better than that on their own, so it would be wiser to take half the money immediately.