Monthly Check or Lump Sum For Your Pension?
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Right now, 30 million Americans are still covered by a traditional pension plan, according to a recent CNN Money article. If you’re one of these people, then at some stage you have to decide whether you want to receive your pension in one lump sum on retirement or by monthly checks for the rest of your life. Apparently, it’s not such an easy decision.
If you had a crystal ball and could forecast the year of your death, then the calculation and decision would be clear. Unfortunately, we don’t have that crystal ball, so you need to do some hard thinking. The Money gang actually summarize that in most cases, the monthly check will work out financially better than a lump sum - yet 90% of people choose the lump sum.
While it’s a complicated matter, there are a couple of situations where the decision is clearer. If you’re offered a larger monthly pension to take early retirement, then monthly checks are almost definitely the best decision. If, on the other hand, you retire at the usual age but are in poor health, a lump sum would usually be the better option. For everything else in between, it’s a matter of risk and calculation, but they still say the monthly checks are likely to leave you financially better off.
This entry was posted on Thursday, August 7th, 2008 at 4:47 am and is filed under Retirement. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
