hey guys, anybody here know if I'd be correct to assume that interest rates cannot go negative for purposes of lump sum estimates? In other words 0% would be your absolute best interest rate ever available for the computation, and I think it's just about there right now. TIA for any info on this.
3 replies (most recent on top)
IMHO and lets keep in mind we are in uncharted territory here......When you consider the way interest rates impact your lump Doewould have to argue that a negative rate isn’t going to change the lump sum. Consider this - your lump sum is calculated by a formula using your monthly annuity X the number of months your specific mortality table says you will be here on planet earth. Once they have that number they discount your lump sum assuming the current interest rate X those same number of months = lump sum. Once the interest rate hits 0% there is no more discounting and you get the full value of your lump Doedon’t believe your lump sum can ever be better than your annuity X number of months. Your mileage may vary and objects in the mirror may be closer than they appear....
@qrhs, I agree with your comment but it does not answer the person's question at all. They're asking if the lump sum interest rate can go negative.
Interest rates sure can go negative - they already are in Europe. That's coming here next. Pumping the stock market is all that counts, and neg rates will be the only way to do it soon. Look how low they already are - and in a supposedly "booming" economy.