If you are approaching retirement and are looking at all the different options that are available to you, lump sum versus payments may be one of the options that you are considering. There are advantages and disadvantages to each type of payment plan. Although most insurance companies only offer a limited amount of flexibility with their payment plans and usually lump sum payments are the only option for retired seniors. But if you are nearing retirement age and have a high annuity rate, you might want to think about providing for future payments to ensure your financial future even after you retire.

Most people do not appreciate the difference between a lump sum versus payments when they are deciding on the best method for them to prepare for retirement. When comparing these two options, there are two primary considerations: life expectancy and future value. Life expectancy is how long you are expected to live and future value is how much money you would have made if you had invested it at the time of your death. Life expectancy is measured in years and future value is measured in percent. So if you are planning on retiring at age fifty, you would be receiving either two payments or four payments, depending on the level of your current annuity.

Some people mistakenly believe that lump sum versus monthly payments make more sense than saving for retirement. They choose to save because they are not sure whether they can afford the high cost of an annuity at that time. While it is true that saving for retirement is less expensive than paying interest on an annuity, the payments will still be costs unless you are guaranteed to receive them. When you invest for retirement, your monthly payments are based on how much you invest and what type of return you get on that investment. And even if your initial investments turn out less than anticipated, you can always withdraw and use the money for whatever you want.

When comparing lump sum versus payments, another important consideration is the extent of your injury or illness. If you are severely injured, the severity of your injury will have an enormous effect on your ability to earn an adequate living. However, it is possible to make lump-sum payment plans for less severe injuries. So if your company offers an insurance benefit in place of a lump sum payment, take advantage of that benefit.

Another factor you should consider when comparing lump sum versus payments is your retirement income. If you are currently earning less than what you expected in your retirement, an annuity might not be a good choice. It is far better to save for retirement than to depend on an annuity to provide you with income during your golden years. A lump sum payment may be the easiest way to achieve this goal. But if your total monthly payments do not allow you to reach the amount you need to live comfortably once you retire, an annuity can also be a bad idea.

Some employers offer health insurance as part of a benefits package. If your employer offers a health insurance benefit, it might be a good idea to purchase that health insurance right along with your annuity. This is a more affordable option than lump sum versus payments; you also have the security of knowing that your health insurance costs will be paid at the end of your career and not at the time you need them most.