Lump Sum Versus Payments

One of the most commonly asked questions when comparing lump sum versus payments for personal loans is whether or not the lump sum itself is actually better than regular monthly payments. The truth is, actually it depends on a number of different variables. If you’re receiving a large sum right now, then you might be better off saving that money for retirement in the long run. On the other hand, if you’re not receiving any significant lump sum funds now, and think that you might in the future, then a lump sum might make more sense than waiting for payments to be made. It all depends on your individual circumstances.

There are a number of factors to consider when determining whether a lump sum versus payments makes sense. One important consideration is what your future plans are. If you’re unsure about how much money you’ll have in the future, lump sum might not be a good idea. While annuities do provide a certain level of security, they don’t provide a permanent income. This is simply because annuities will only pay a certain amount (based on the amount of coverage) over a specified period of time.

Another factor to consider when comparing lump sum versus payments for personal loans is your tolerance for risk. If you anticipate a large amount of loss in the future, such as the case with some long-term pension payments, then you might not be a good candidate for an annuity. You might instead be better served by taking out a loan with better rates (and better payment terms) and longer terms. In the past, people who held long-term investment bonds often did better economically than those who held annuities, but with more recent studies showing that more of the bond holders who lost their jobs were retirees than those who held annuities, this may be changing.

Probably the most important issue in comparing lump sum versus payments for pension and retirement age is how your pension and benefits will be affected by the Great Recession. Right now, we are seeing many people being laid off their jobs in record numbers. While this definitely has an effect on retirement incomes, some people are not seeing their pensions go down as a result of this. If you’ve already been receiving pension payments and plan on accepting them, your pension may not be affected. If you have yet to reach retirement age and see an increase in your pension (like your company has raised it), you could stand to lose a lot more if you accept the new terms.

There are also differences between the types of accounts you have. A defined benefit plan features no cost-of-living increase. On the other hand, indexed funds are usually only offered in retirement age, with cost-of-living increases built in. So, if you’re looking to increase your pension, lump sum versus payments might be a better option.

As you can see, lump sum versus payments might be a good way to compare the two. Of course, these aren’t your only options. You could use a standard annuity or a specified earning plan. However, if you want to ensure that you’re getting the best value for the money you invest, take a look at the three suggestions above.