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What would you take? 2 Million in one payout or 4000 per week for the rest of your live

All following calculations use money with a currency symbol. Insert your local symbol there.

The naive approach

A naive approach to the question would be the simple calculation of how long do you expect to live (in weeks) multiplied by 4000.
You will receive 2 million after 500 weeks or about 9 years, 7 month and 2 week. If you live longer than that, this clearly is better, because it is more, right?
Not really.

The 100% investment approach

The actual numbers depend on how you use the money, but lets run some numbers: all money is invested at a interest rate of 8%.
In the left column is the number of year, in the middle the sum of one time payment plus interest.

amount of money yearly interest
year 1 2.000.000 160.000
year 2 2.160.000 172.800
year 3 2.332.800 186.624
year 4 2.519.424 201.553
year 5 2.720.978 217.678


So in year 5 you make just in interest 217.678, 4.000 a week would only be 208.000.

Spending 1000 a week on living

What about spending 1000 a week on living, how does the math turn out?

amount of money yearly interest
year 1 2.000.000 160.000
year 2 2.108.000 168.640
year 3 2.224.640 177.971
year 4 2.350.611 188.049
year 5 2.486.660 198.933
year 6 2.633.593 210.687

So even if you spend all the money, you would get on a 1000 a week base, you still get more interest than you spend.

Going on a shopping spree

What is the maximum amount I can spend assuming 8% interest and 2 million?
Basically you could spend the whole interest for a year, so 160.000 or 3076 a week and your fortune would not decrease from a number value.
That is less than the 4000 but you still got that 2 million as investment on top.
You have the inflation, so the same amount would buy less.

Taking care of inflation

assuming the interest rate of 8% and an inflation of 3% you can get 108.000 a year (or 2076 a week) out of the investment and it will last about 50 years.

If you manage a bit better and stay below 98.000 a year (or 1884 a week), (increased by 3% yearly), you can enjoy it for 100 years.

Until then, you probably don't need the money any more and depending if we go the Star-Trek route, nobody needs money anymore.

Wait, that's less than 4000 a week!

oops, slight turn of event, here.
No, not really. If you compound a yearly 3% increase of spending starting from 98.000 a year, in 100 years you end up spending 1.8 million a year or over 36.000 a week.

Conclusion

If someone rich makes you this offer, take solution C and send him/her my way, I will take over and do the math.

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