Would you rather have 20 million right now or $3,000 a week until the day you die?
Here’s why anyone answering $3,000 a week has probably never been more wrong on anything.
- 20 million
- $3,000 a week
First up, actual money count.
Average life expectancy is 78.5 in the United States.
If a person got $3,000 a week from age 18 to 78, that’s be 60 years and 9.3 million made.
Off the bat, the choice to take $3,000 a week means they’d only make 43% of 20 million.
Second, inflation.
The inflation rate since 1960 has held at 3.6%.
$3,000 in 1960 would be $27,000 today.
If that held, in 60 years, $3,000 would be about $333 today.
Any agreement promised a fixed cash number over cash upfront will be victim to inflation.
Third, the alternative which is investing and getting a return.
401k’s average a 7% return.
1.4 million a year
Already, the first year would pay a little under 9x the $156,000 a year $3,000 a week would get.
Another factor is the growing return where if someone kept 50% of the returns in the fund and 50% being paid directly, that person would make 157 million a year in 60 years.
157 million versus $156,000 60 years later
And that’s pre inflation.
$156,000 in 60 years will likely only be about $17,300 today.
157 million would be 17.4 million.
Purchasing power on $3,000 a week would only be 11% of what it is today.
The 3.5% return on cash would be in 60 years 87% of the total 20 million in purchasing power and 1,242% the 7% return.
This mindset seems like a really abstract example, but a lot of people with cases such as lottery wins, life insurance buyouts and inheritance cases normally don’t buy into the cash upfront idea.