Should You Take Your Pension as a Lump Sum

Traditionally, pension plans were set up to pay retirees monthly payments for life. Now, if you’re lucky enough to still have a pension plan, corporations are attempting to divest themselves of that responsibility as well, with the option of a lump sum payment. Should you take your pension as a lump sum? Let’s see.

The right financial choices make for a secure and enjoyable retirement.

Should you take your pension as a lump sum

One question to ask in making this decision is “what’s in it for the company.” Why would they want to give you a big chunk of money instead of monthly payments?

…employers are increasingly looking to “de-risk” their pension plans. The idea is that if more participants accept lump-sum payouts instead of monthly checks for life, companies can cut their pension costs and reduce their long-term liabilities.

As with the failed 401(k0 experiment, employers — in order to increase shareholder value — want to put the burden of your retirement onto you. That’s great — if you’re ready, willing and able to take that responsibility; but most of us are not. And, neither the companies we work for, nor the financial planners whose services they make available to us, care whether we’re financially educated or not. In fact, it’s in their best interest to keep us financially ignorant, so we’ll trust them and make whatever ridiculous financial choices they suggest to us.

But while de-risking may be the right move for a company, the question for you is whether you’re better off locking in payments for life or accepting a bundle of cash that you can invest and draw on throughout retirement.

Only you can make that decision and the more you know the better your decisions will be. Should you take your pension as a lump sum? Only you can decide.

Click here to read more about lump sum pension payouts.

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