Should You Take That Lump-Sum Payment?


Filed under: Retirement


Planning for retirement is much more difficult for Baby Boomers than it was for previous generations, for many reasons. One of those complicating factors is the disappearance of company pension funds. Many companies are phasing them out these days, either by discontinuing them entirely or offering lump-sum payments in the place of lifetime payments.

plants on piles of euro coinsEmployees in this situation are facing a difficult decision at retirement: Take the lump-sum payment, or stick with the original pension plan? You might hear that your neighbor or brother-in-law made one decision or another, and they’re either pleased or upset about it. But what worked (or didn’t work) for one person in this situation really can’t be carried forward to your own situation.

If you’re facing this decision, you will notice that each scenario carries some pretty clear pros and cons.

If you choose to take the lifetime payments:

  • You will enjoy guaranteed income each month (a pro).
  • You will be more protected from fluctuations in the stock market (a pro).
  • You won’t have to worry about outliving your money (a pro).
  • If you pass away, your pension payments will stop. This could leave your spouse or any dependents without needed income (a con).
  • You won’t have the option to access additional cash in an emergency (another con).

By contrast, if you decide to accept the lump-sum payment:

  • You could invest the money, and possible earn a bigger return on it (a potential pro).
  • You will have greater control over your income, deciding how much to spend and when (a pro).
  • You could overspend, and find yourself short on funds later in retirement (a con).
  • Investments might not pan out the way you had hoped (a con).
  • Your monthly income won’t be guaranteed (a con).

As you can see, this is a difficult, multifaceted decision. Don’t try to make it alone. Give us a call about this dilemma, or any other retirement planning decisions that you’re facing, and we’ll be happy to offer professional, experienced guidance.



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This information has been provided by a licensed insurance professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting the insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax, trust and estate, or investment advice. Infinite Wealth Advisors is not an investment advisory firm.  Investment Advisory Services provided by NAMCOA® – Naples Asset Management Company®, LLC, a federally registered investment advisor, website: www.NAMCOA.com .