One of the biggest differences between a lump sum and payments is that with a lump sum, you can invest the money in an asset. This may not be the case when investing it in monthly payments. With monthly payments, the amount invested as well as your ability to get some interest from it are restricted.

The U.S. government has established the Office of Worker’s Comp Insurance to address the concerns of employees who are receiving compensation through fixed-rate employers. If you are receiving this kind of benefit, you have to go through the prescribed procedure for accepting the benefits. However, among these stipulated finding about lump sum versus payments, the fact is that payments are more advantageous in terms of safety.

One of the primary reasons why people go for the lump sum versus payments is the safety of the annuity itself. When you go for pension payments, you have to be ready to face withdrawal of your accumulated amounts at any given time. You may be vested in your pension payments for many years or decades depending on the kind of agreement signed with your employer. However, the safety of your pension payments are subject to fluctuation especially if the economy turns worse.

There are people who are able to withdraw their accumulated pension without much difficulty. When you opt for a lump sum versus payments, you can avoid having to give up the guaranteed interest rate that comes with your annuity. This means that you will not have to wait for two or three years just to see whether your guaranteed interest rate would recover or not. If it does not recover, then you do not lose any money.

There is also a difference when it comes to the tax implications when you opt for lump sum versus payments. When you receive your pension payments, you do not have to pay any federal or state taxes. The money is yours until you use it. In case of a lump sum distribution, you have to pay taxes depending on your income and the age of the person who gave you the pension.

You may think that choosing a lump sum as opposed to monthly payments is a bad idea. If you are concerned about your retirement account, you can opt for an annuity calculator. Enter all your information and the lump sum amount into the program. It will tell you how much your retirement account will be upon your death and how much you will need to save for your other expenses. With this information, you should be able to choose the best option for you.