Which would you choose?
This is a great discussion and mental challenge for the whole family!
A few considerations:
– how long do you expect to live? The breakeven point on a straight-line payout is 8.33 years.
– how will the tax rate affect your choice? Using 2020 IRS tax code, $10K per month would be charged 24% tax, whereas $1M lump sum would be charged 35% (for single or married filing separately and assuming any other income does not bump you up into the next bracket).
– how trustworthy is the payor? Will they be around for the rest of your life? Will the funds be placed in trust or some other legal account to ensure you are paid for the rest of your life?
– what is the rate of return on any investment you might be making with these funds?
– how much do you need to live on? Would $10K/month pay for all of your expenses for the life you want to live, or do you need more?
– what is the future value of both numbers? $10,000 in the future will most likely not be worth as much as it is today.