Problem:
Your favorite uncle, having saved and lived frugally throughout his career, has retired at the age of 60. His former employer's pension plan has offered him the alternative of 1) receiving $478 per month until his death, or 2) receiving a lump sum distribution of $76,120. Lump sum payment under 2) would occur on the decision date; monthly payments under 1) would commence one month later. Your uncle remains in good health. He estimates that his alternative reinvestment rate is 6% per annum. To what age must he live to be better off with alternative 1), the monthly payment for life?