Originally Posted by kbst
There is that option with a lower annual payout ~ 40k
At the 40K payout assuming you use the pension as equivalent to 500K and 20K per year adjusted for inflation (I assume 4% long term just above the long term average for conservative sake) you will top out at 18 years at which point your savings from the remainder will be $231K (assuming a 40% tax rate and a 5.5% after tax return) The money would hold out at that rate for a total of 40 years (22 more years). At which time it would revert to only 40K per year which would be worth about 40% of the original withdrawl of 20K per year.
At a 6.5% after tax return you will never run out of money.
To be fair questions like this could really involve many strategies such as deferral of social security, minimization of income taxes, effects of inflation. Actual returns on investment. However in this case it appears the base pension with a possible insurance policy for a suitable amount of insurance on your wife for yourself would be the wisest course,
As a reasonable estimate of the value of the pension I went to Vanguard and requested how much I would need to get the pension you stated. At 715K the lump sum is only 70% of the indicated actual value.
Primary Annuitant -- Birth date: 06/15/1948 Sex: F
Quote Expiration Date: 11/27/2007
Benefit Commencement Date: 01/15/2008
State of Residence: IN
Payments per Year: 1
Initial Payment Amount: $48,000.00
Total Premium Amount for Fixed Single Life Annuity: $715,297.28
Cancellation Option Selected: No
Qualified Assets: Yes