I am about to take advantage of an early retirement "package". I am 55 and will continue to work hopefully for another 5 to 10 years at another company. My question is should I take my pension in a monthly payout starting now,or just take a lump sum and invest it foolishly for another 10 years. Some one said to start taking the monthly payments as you never make up the difference and you don't know how long you may live. I was going to take the lump sum and invest. What do you think?
The Foolish answer always is to take the lump sum, roll it over to an IRA and invest the money for optimum return. Doing this gets you all the money and preserves it for your estate and your heirs in the event of your death. If you take the payment early, you are buying a fixed annuity with all the problems associated with that. No inflation protection. No assets to you heirs on your death (unless you select survivor payments or a fixed minimum number of payments all at higher cost--i.e., lower monthly payouts).The one concern with the lump sum is risk. You are taking the risk that you will be able to invest the money at adequate return (and not lose it) to cover you retirement expenses. With the fixed payment, you have an insurance company and its assets and reputation standing behind your payments. So there is less worry.You'll have to decide what makes sense in your case. That depends in part on how much you need the money and whether you have other sources of income.Also be aware that you can leave your pension where it is for now and start collecting or rollover to an IRA later. If your pension plan is a defined benefit plan, your cash value is higher while interest rates are low. So now is a good time. If you plan to invest in stocks, you may also want to consider where the market is now compared to where you think it will be sometime in the future.Best of luck to you.
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