No. of Recommendations: 1
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.
Print the post  

Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement