Episode 6: Should I Take a Lump Sum Pension?

Published: July 2, 2020 | Updated on: October 21, 2020

Thank you for joining me for Episode 6 of my NEW Money Wisdom Question Series, where I film answers to common financial and retirement investment questions in 2 minutes or less. Today I want to talk about receiving a pension and the options for taking the payment.  

Traditional Pension:

A traditional pension is when you take the guaranteed stream of payments from your company when you retire. You get guaranteed monthly checks for as long as you live or you can put a spouse on there, so it’s guaranteed for both you and your spouse. That’s the advantage; guaranteed for as long as you live – you can’t outlive the pension. The disadvantages are that you lose flexibility and control.  

Rolling Your Pension Money to an IRA:

You can take the money and roll it over to an individual retirement account (IRA). First of all, that’s a tax-free rollover. It doesn’t trigger any taxes. What happens now is, you can decide how much you want your monthly payments to be. You can stop and start them. You can increase them over time to protect against inflation. Also, you can take chunks of money out from time to time while maintaining monthly payments to take a trip, to buy a gift, or pay for a grandchild’s college education. You bear the investment risk if you do that, but what you gain is flexibility and control over the money.  

In Conclusion…

Everybody’s situation is different, so get some professional advice on that, but make sure you investigate all the possibilities for your situation.

Thanks for joining me and I hope you found this information helpful!

P.S. If you enjoyed this topic and want to learn more, get our free retirement book, “The Lump Sum Pension Payment Guide“.

P.P.S. Feel free to submit questions here for a chance to have them answered!