One of the biggest questions when comparing lump sum versus payments is exactly whether or not a lump sum is actually better than payments over time. The reality is, it truly depends on a number of different variables. First, you have to consider how much money you’ll get when you die. Some people will be able to sell their belongings and cash in on their life insurance policy’s face value. Others may be more conservative and choose to build a nest egg instead.
Your other option will be to make larger payments over time, and this can take years. Another variable is what your lifestyle is when you reach retirement. If you’re frugal and live a more modest lifestyle, then a lump sum may be an optimal solution. On the other hand, if you’re a spender and enjoy living a luxurious lifestyle, then a pension payment could be more practical.
You also need to think about your retirement age and how long you plan to live. If you plan to retire at a younger age, then you should probably opt for a lump sum solution. Larger pension payments at younger ages can help you afford your retirement, which can help you enjoy your golden years even more. If you’re retired at a younger age and don’t plan to live past retirement age, then you can focus on paying your bills and saving as much money as possible until your golden years.
Perhaps the biggest factor that will play into your final comparison of lump sum versus payments will be your state of health. If you’re relatively healthy and rarely visit the doctor, then this might be a good way to go. However, if you have serious health problems, or if you’ve been injured in an accident, then you might want to look into worker’s compensation settlements. Often these types of settlements are much higher than a lump sum payment would be, especially if you’ve been injured in a workplace accident.
One last thing to keep in mind is the fact that different states have their own guidelines for calculating workers’ compensation settlements. This can make it confusing, but simply consulting an experts’ opinion can be helpful. Typically, your state’s Department of Insurance will provide you with a suggested settlement amount based on their calculations. For more information, you should contact your state’s department of insurance. Keep in mind that this isn’t an exhaustive list, and you should consult your own state’s workers compensation board for a more complete list of caseloads and dollar amounts applicable to your area.
In the end, the choice between lump sum and monthly pension payments might be determined by your current financial circumstances. If you can comfortably afford both options, it might be best to weigh your options. But if you find that your financial situation makes one option a better choice than the other, it’s okay to make your final decision a simple matter of practicality. In the long run, it might be the best decision you ever make!