Calculate A Lump Sum Payment
Many structured settlement websites often feature a calculator that can aid you with figuring out your lump sum payment. However, what a calculator can't figure are the variables that will affect how the final numbers should be interpreted. Let's look at this idea in detail.
Many companies are offering the choice of a pension in the form of a lump sum, not for you; but because it looks good on their balance books at the end of the year. However, as it turns out, there are occasions when a lump sum might be more valuable to you too. We are not just talking about a choice that will provide you with the most money. If you can get the same longevity and benefit out of a lump sum as you could an annuity, many would still take the lump sum, because it keeps you in control of your money.
When calculating a lump sum payment for a pension, you need to take into consideration the type you are dealing with. In pension terms, a single life, means the money will stop at the beneficiaries death, while a 50 percent joint survivor means the spouse will continue getting half, and 100 percent means both partners will be covered with the entire amount for the remainder of their life.
Another important number is your expected lifespan. An pension will only payoff if you can enjoy its benefits beyond the value of the lump sum you would get. For instance, if you have a single life plan, and are in poor health, you have a better chance of creating a nice nest egg for you and your family by making the most of a lump sum.
Keep in mind, if a lump sum does not work out, you can always purchase a commercial annuity. For that matter, a pension plan can also be sold for a lump sum, so you are never completely stuck. However, keep in mind that a wrong choice can cost you money, so it is better to get it right the first time.