Retirement benefits
Your dad has been asked to retire today and take his retirement benefits either as a
lump sum or as an annuity. The pension officer presents him with two alternatives:
● An immediate lump sum of CHF 2 million
● An annuity with 20 payments of 200’000 each year starting today
The interest rate at your bank is 7% per year annually compounded. Which option would you recommend your dad to take?