I am is faced with a choice of two alternatives. There really is no right or wrong answer, I just want to hear someone else's input/methodology. Here are the two choices:
Keep paying $5,722.56 for the next 70 quarters to fund a pension liability
or pay off the entire amount for a lump sum of $229,293.73
I am currently using a benchmark rate of 3.3% (which says I should pay the lump sum), but I believe my benchmark rate should be higher.
My question is this:
- I want to confirm the discount rate on how the lump sum was calculated
- At what discount rate would it be worth continuing to pay off the $5,722.56 per quarter?
- Which option would you choose: quarterly payments or lump sum? What discount rate did you use? An explanation on why you chose the interest rate would be appreciated, not required.
The 5,722.56 is paid a the end of each quarter (March 31st, June 30th, etc). The lump sum payment of $229,293.73 would be due now if I chose to do that.