£550 a week or £550,000 lump sum

NBLondon

At anything under 25 I would have taken the guaranteed income to allow me to try a job I loved rather than a job I needed to pay the rent. The idea of buying a house was well off the radar. In my thirties and forties I would have taken the lump sum, paid off my mortgage and re-invested in more property. At 50, I'll take the lump sum and whack it in the safest,easiest investment I can to see if I can retire at 55.

Anonymous101

Lots of people are saying the weekly amount for a younger person. Have they considered the long term effects of inflation? £550 a week is enough to live off for now for me but that won't be the case in another 20 years.

I'd take the £550k and invest it. Maybe drawdown at less than 4% a year and that way I'd always keep the capital relative.

Aegis

For me, I'd want the lump sum, as I reckon it would be more useful for me than a supplemental income. Plus I would hope to be able to better the total value available to me over my lifetime by judicious investment choices - obviously no guarantee, but I'm doing okay so far!

jamei305

If inflation is the same for the next 60 years as it has been for the last 60, then when this 18 year old is 78 her £550 per week will be worth £24.

PasturesNew

Lump sum, you can then get yourself set up and if you want a lifetime income then invest what's left.

You can buy a lot of house/stuff for £550k and owe nobody anything. Trying to sort out mortgages etc with £550/week is more problematical. You'd still be having to "borrow" for things you could've bought for cash. £550/week, or £2500/month is an income of ~£30k, so you'd have a max mortgage of ~£150k .... rubbish if you're trying to buy a "house for life".

Own outright soonest I say .... don't get drip fed income, nor tie yourself to commitments and debt.

lr1277

For those of you saying you would take the lump sum, how many would do so if you knew you had to go public to receive the money?
I don't know but that may be the law in Canada. I mention it because I think I read something along those lines.
Or you may have read the story of the women somewhere in America who won the biggest powerball lottery ever ($450 million I think), but she bought the ticket in a state where to get the money you had to go public. She went to court to still get the money without going public but it seemed to be stressful.

Thrugelmir

@18 take the tax free income for life.

Anonymous101

Thrugelmir wrote: »

@18 take the tax free income for life.

As Jamie say though "if inflation is the same for the next 60 years as it has been for the last 60, then when this 18 year old is 78 her £550 per week will be worth £24". If she invested the £550k and drew down 3-4% then that wouldn't be an issue.

DigForVictory

I love this as it balances beautifully - you can make a good case for either side & of course her youth is such an asset.
That said, horse sense is priceless - and a weekly drip feed can't be burned through as fast as a lump sum, should horse sense be unreliable.

In her shoes, I'd take the lump sum, but also finance classes & set up a Will & a financial management team so when I found Mr.Right I'd be a sight more certain he was genuine & not a fortune hunter. Also to keep my beloved but extensive family in a degree of check.

There are those who dream, of wining the lottery & those who nightmare about it. I'm in the latter camp. My piggy bank is always half empty!

zagubov

My first salary after graduation was a bit over £4k per year.
Almost 40 years later I'd need at least 10x that amount to keep my head above water. I'm hoping that the high inflation rate of the earlier decades won't return, and that we keep the lower rates we have now, but who knows?

Does Canada have the long-fixed-rate mortgages the US is more used to rather than the short fixes we have in Europe?

Is her income a marital asset a spouse could demand a split of? Are Canadian divorce rates similar to US ones? If she dies early, God forbid, do her dependants face financial misery as well?

I don't think she's mad to take the income rather than the lump sum. She can study, take a job she likes, Buy a house with a short mortgage. She's showing a substantial amount of wisdom in rationing the money out. She might also have enough self-awareness what a sudden windfall can do to an inexperienced teenager.

Unearned money's a bit like acid chemicals. I'd like a steady supply of vinegar on my chips, but I don't want to fall into an acid bath!