Your Client, Norman Suskind, Is About to Retire

question 42

Essay

Your client, Norman Suskind, is about to retire. His company has given him a choice between a lump-sum distribution and a single lifetime annuity. A guaranteed lifetime income (which Norman could not outlive) of $3,400 per month is very appealing to Norman. He has all but decided to accept this offer, and wants your opinion before signing on the dotted line. Are you willing to go along with the proposition?

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Definitions:

Units-Of-Output Method

A depreciation method that allocates the cost of an asset over its useful life based on the units it produces, reflecting usage rather than mere passage of time.

Depreciation Expense

An accounting method that systematically allocates the cost of a tangible asset over its useful life.

Commercial Substance

A situation in future cash flows of a business that are expected to change significantly due to a transaction, indicating the transaction has economic impact.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a company's assets over time.