This article will help you understand what lump sum versus payments are and whether you should opt for either. As this is an article based upon my own experience as a retiree, I cannot really comment on what you should do. However, I can tell you that both lump sum or annuities are excellent choices but you will have to take your own situation into consideration.
For a start lump sum is certainly a better option than payments. Why? First of all, lump sums are much easier to obtain than payments. Secondly, when you look at how large the money is it will be much easier to get it back if you need it.
On the other hand, payments aren’t necessarily the best choice. There are many advantages and disadvantages attached to these types of investments.
One of the biggest benefits to receiving a lump sum is that you will immediately have a lot of cash which can be used to cover bills, holiday expenses, etc. If you need some immediate money in order to cover a number of unexpected costs then this could be just what you need. If you were to receive payments for several months, you will most likely find that you haven’t saved enough money. Also, this type of money usually comes with restrictions, as will most investments. You may find that your income is too low or too high for you to qualify for the cash.
In addition to having immediate access to money, the main advantage of receiving a lump sum is that you won’t have to wait around for a long time before you receive your payments. Most annuities will last for ten years or so, but you won’t actually receive your payments until you reach a certain age. If you want to receive money for longer then you could always opt for a life annuity that will pay out over time. Again, this would mean you would have to think about how long you want the payments to last for and whether you are able to continue paying them if you are not.
Overall, lump sum is definitely a better choice for people who are just starting out and want more immediate cash than payments would. However, you will have to weigh all of your options before making final decisions.
Another issue to consider when comparing lump sum versus payments versus other investments is the tax benefits involved. Although there is a tax relief involved in both options, you will generally pay less tax on your lump sum as it is not taxable. This is particularly true if you receive it through a structured settlement or annuity.
These are some things you need to know about lump sum versus payments. The best thing to do is to compare each one of these to see which one would be a good fit for your financial situation.