Comments on: How much is $100 worth in the future http://moneytipcentral.com/how-much-is-100-worth-in-the-future Sustainable Personal Finance Tue, 13 Dec 2011 11:11:30 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Matt http://moneytipcentral.com/how-much-is-100-worth-in-the-future/comment-page-1#comment-4447 Matt Tue, 10 May 2011 15:09:17 +0000 http://moneytipcentral.com/how-much-is-100-worth-in-the-future#comment-4447 Thanks for the great question Brian. In order to figure which option is best you would need to provide how long your pension will last. If the pension lasts until you die (sorry for the grim example) you may want to consider how long you think you'll live. If your parents both lived until they were 100 and the pension has no end date you'd be better taking it. The other thing to consider is the rate of return you think you could achieve on your own if you had the lump sum. If you can return a consistent 20% a year you'd be better off taking the lump sum. If you have the time you anticipate collecting the payment and the rate of return in your own investment you can get an exact answer. Hope this helps...good luck! Thanks for the great question Brian. In order to figure which option is best you would need to provide how long your pension will last. If the pension lasts until you die (sorry for the grim example) you may want to consider how long you think you’ll live. If your parents both lived until they were 100 and the pension has no end date you’d be better taking it. The other thing to consider is the rate of return you think you could achieve on your own if you had the lump sum. If you can return a consistent 20% a year you’d be better off taking the lump sum. If you have the time you anticipate collecting the payment and the rate of return in your own investment you can get an exact answer. Hope this helps…good luck!

]]> By: Brian http://moneytipcentral.com/how-much-is-100-worth-in-the-future/comment-page-1#comment-4355 Brian Sat, 07 May 2011 09:11:39 +0000 http://moneytipcentral.com/how-much-is-100-worth-in-the-future#comment-4355 Hello - I know you're not offering a service... of course.... but maybe you can give me a clue as how to start this for myself? I will soon be 65, and must retire then, on a pension of about 1200 per month. Years ago, I worked for a few years for another (UK) company and they will pay me a small pension of either 5736 a year, or 4275 a year if I accept a tax-free lump sum of 28485 now (the UK tax people will take 30% of the 5736 or 4275, but then refund it each year). I really can't work out which would be better - or is it just about taking a bet on your longevity? Thanks a lot for even a clue! Hello – I know you’re not offering a service… of course…. but maybe you can give me a clue as how to start this for myself?
I will soon be 65, and must retire then, on a pension of about 1200 per month. Years ago, I worked for a few years for another (UK) company and they will pay me a small pension of either 5736 a year, or 4275 a year if I accept a tax-free lump sum of 28485 now (the UK tax people will take 30% of the 5736 or 4275, but then refund it each year).
I really can’t work out which would be better – or is it just about taking a bet on your longevity?
Thanks a lot for even a clue!

]]> By: Matt http://moneytipcentral.com/how-much-is-100-worth-in-the-future/comment-page-1#comment-2852 Matt Tue, 26 Oct 2010 16:45:25 +0000 http://moneytipcentral.com/how-much-is-100-worth-in-the-future#comment-2852 That's a good question. The one variable that you need is the interest rate you think you can earn with that money, if it wasn't used to buy solar panels. At an 8% annual return (which is roughly the return you would have gotten in the stock market from 1989 to 2009) it would have been a better to buy the first option of paying out the $12,782 up front. With an 8% ROI the first option would have had an opportunity cost of $61,981.36 and the second option would have had an opportunity cost of 63,518.50. You will have lost the least amount of money by going with the first option at an 8% investment rate. If the investment return rate was 12% the second option would be a better investment because it would have an opportunity cost of $125,051.30 while the first option would have yielded a cost of 139,228.60 (you want to pick the lowest opportunity cost). One thing to remember when you're playing around with Time Value of Money calculators is to divide the annual return by 12 to get your monthly return rate. It would be safe to say that anything under that 8% return would warrant you going with the first option of spending the $12,782 up front. The other variable you will need to help you make the decision is the cost of electricity and the savings you will reap because of the solar panels. With the cost of solar panels dropping each year I would recommend buying the least amount possible and buy extra panels as the price drops. That’s a good question. The one variable that you need is the interest rate you think you can earn with that money, if it wasn’t used to buy solar panels. At an 8% annual return (which is roughly the return you would have gotten in the stock market from 1989 to 2009) it would have been a better to buy the first option of paying out the $12,782 up front. With an 8% ROI the first option would have had an opportunity cost of $61,981.36 and the second option would have had an opportunity cost of 63,518.50. You will have lost the least amount of money by going with the first option at an 8% investment rate. If the investment return rate was 12% the second option would be a better investment because it would have an opportunity cost of $125,051.30 while the first option would have yielded a cost of 139,228.60 (you want to pick the lowest opportunity cost). One thing to remember when you’re playing around with Time Value of Money calculators is to divide the annual return by 12 to get your monthly return rate. It would be safe to say that anything under that 8% return would warrant you going with the first option of spending the $12,782 up front.

The other variable you will need to help you make the decision is the cost of electricity and the savings you will reap because of the solar panels. With the cost of solar panels dropping each year I would recommend buying the least amount possible and buy extra panels as the price drops.

]]> By: Sy Cohn http://moneytipcentral.com/how-much-is-100-worth-in-the-future/comment-page-1#comment-2847 Sy Cohn Tue, 26 Oct 2010 15:16:29 +0000 http://moneytipcentral.com/how-much-is-100-worth-in-the-future#comment-2847 Hello, I have a question. We are thinking of leasing solar panels. We can either pay $12,872. today. Or we can pay $6489. today and $54.96 monthly for 20 years. Which would be economically more advantageous? Thank you, Sy Cohn Hello,
I have a question. We are thinking of leasing solar panels. We can either pay $12,872. today. Or we can pay $6489. today and $54.96 monthly for 20 years.

Which would be economically more advantageous?

Thank you,
Sy Cohn

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