Comparing Lump Sum versus Payments
Before deciding upon which method to use to accomplish your retirement funding, you will have to determine the difference between lump sum payments versus monthly payments. As the old saying goes, “you get what you pay for.” There are definitely advantages to each of these retirement funding methods. You will need to take a look at your current income and determine what you would be able to comfortably afford on a monthly basis if you were to receive one lump sum payment versus several monthly payments. This simple, yet important, decision will go a long way towards helping you make the right choice when deciding between lump sum versus monthly payments for your retirement funds.
The cost of a lump sum versus payments for your retirement funds is relatively high in most cases. A five figure monthly pension can easily run into the tens of thousands of dollars per month. There are many people that underestimate the expense of receiving a lump sum pension payout. In addition, most people simply do not consider the fact that even though their pension may run into the hundreds or thousands of dollars per month, they will only receive that money once per year. This means that they will actually lose money if they were to wait a few more years to receive a larger pension payout.
Monthly pensions are nice because they will offer a steady flow of money throughout your retirement. However, this is subject to the amount of time that you have left on your pension plan. Once your time on the pension plan is up, your income will be cut drastically and the pension that you received will not be enough to cover your expenses. This is why it is usually recommended that any person that has a lump sum payment to make should take a look at the financial statements of their company to see how much they are expected to make after leaving the company. If the amount of money that the company expects them to make is much lower than the lump sum that they have proposed, then there might be some cause for you to be concerned.
The best way to make sure that you are saving as much money as possible in your pension is to use a combination of both a lump sum versus payments and a traditional annuity payment. You can usually get quite a bit more from a lump sum payment than you can from a monthly annuity. This means that your monthly bill will be lower, your interest rate will be lower, and you will probably be able to find a better interest rate than you would be able to find in a traditional annuity. This means that you will be able to have more of your money each month to put into your pension.
There are many other advantages to using a combination of lump sum versus payments when you are comparing lump sum versus payments. You can also compare how much you are actually paying now with what you would be paying if you used a traditional annuity. There is no reason to think that you should use one option over the other when you are looking at ways to ensure that you are as financially secure as possible in your retirement. Take a look at your options, and then talk to an investment professional about what might work best for your situation.
The bottom line is that lump sum versus payments can provide some great retirement income for many retirees. Of course, like any type of investing, it is important that you do your homework before making this decision. You should not simply choose the first option that comes up. Instead, you should look at all of your options and consult with an investment professional to see what your best bet may be. Remember, there is no perfect strategy for investing, but by doing your research and weighing the pros and cons, you can likely find a solid plan that will fit your specific goals.