Lump Sum versus Payments – Which is Best For Your Retirement Income?

Lump Sum versus Payments

Lump Sum versus Payments – Which is Best For Your Retirement Income?

When it comes to deciding between lump sum versus payments, there are many factors that can affect your final decision. For some people, one type of investment is more appealing than the other. For others, it may come down to whether or not they can afford the lump sum or the payments. If you need some extra money each month, think about investing the lump sum in a stock market investment option for your own benefit. By doing so, you can make positive progress towards financial independence even when you’re not working.

As an example, you may want to invest your lump sum versus payments in your pension. One reason this is a good idea is that the cost-of-living increase for the pension is set to increase at a rate of three percent in the next decade. That will cost you a lot more money than the three percent increase in the cost-of-living for a standard, defined benefit, nonqualified annuity. By investing your lump sum in a pension, you can offset some (or all) of the cost-of-living increase. This could help you stay on top of your expenses and provide additional security.

Another reason that lump sum versus payments makes sense is if you are receiving some kind of unemployment compensation. In most cases, this means that you are going to receive a percentage of your regular paycheck as a stipulated finding. The stipulated finding is typically determined by an auditor. However, it can also be determined by considering the amount of time you have been working and what your average paycheck was during your prime working years.

Lump Sum versus Payments. If you are starting over after being laid off or having a disability retirement account run out of money, you may very well be receiving pension payments after the fact. Unfortunately, most people who are laid off do not get to use their accumulated savings because their retirement funds are cut back or rolled into the retirement plan, leaving them with little or no savings to live on.

A pension is one way that you can leverage your savings and put it to work. Rather than receiving what is known as a “level cut” from your pension, your lump sum can allow you to buy down your interest rate on your home equity loan, for example, which will allow you to keep your monthly expenses down. Another option would be to take out a line of credit. If your goal is to build up your nest egg for your later years, this could be an excellent investment.

The bottom line is that both lump sum payments and annuities can be excellent retirement income strategies. However, your situation will determine whether you should utilize both these tools or just one. If you have an immediate need for additional funds, it might make more sense to go with an annuity. However, if you do not anticipate having a monthly income after retirement, an annuity may be unnecessary, since you probably won’t need the extra money anyway. If you are planning ahead, however, an annuity may be able to help you realize your retirement goals.