Lump Sum

[plonq]

I know I've got some time to think about it, but there may be an option when I retire to take my pension as a lump sum, as opposed to monthly payments.

There are pluses and minuses to both options, but at the moment I'm leaning toward the lump sum when the time comes.

Assuming that it's still an option...

Comments

[furahi.livejournal.com]

Just be very very careful if you take it as a lump sum, money evaporates faster than alcohol :O

[plonq.livejournal.com]

That's one of the concerns I have. The other is the "don't spend it in case you need it later" thing. This money has to last me the rest of my life, and if I spend it all now, what will I live on later?

A lot of rich people have died in hovels because of that kind of thinking.

On the other hand, if I leave the money with the company to manage there are consequences there too. If I got struck by a bus, or suffered a heart attack, or died in a freak Cheese Whiz accident, the payouts to my spouse would get cut by half.

If something subsequently happened to her, the company would then keep the rest of the money because it's not transferable. I don't want to spend the better part of my life paying into a fund that just goes into the company's pockets. If I take the money out as a lump sum, at least I can decide what happens to it.

[pierrekrahn.livejournal.com]

Before reading this reply, I was strongly leaning toward the monthly payment option... but you bring up very good points.

I think though, that in the long run you will be way better off with monthly payments. Gotta be prepared in case you stay alive 'til you're 90. If you die young (ie. 60) then it doesn't matter which option you select, but if you take one lump sum, and live until you're 90, then you might be screwed!

I think I'd be more comfortable knowing that I have a steady income for the rest of my life.

[atara.livejournal.com]

I attended a retirement thing at work a while back where they discussed this. They pointed out that a lot of people assume they'll be spending the same amount at 90 that they will at 70, which usually isn't the case.

As you get older, you're less inclined to travel, your housing costs decrease (ie, moving into assisted living or an apartment, etc) and so on. If one of the things you do with your lump sum payout is pay off your mortgage (assuming you still have one) you are basically down to living expenses.

[furahi.livejournal.com]

<blinks> You dont know if Plonq has paid his mortage or not? o_0

[atara.livejournal.com]

We do now, but by the time we retire we might NOT have one. :)

[furahi.livejournal.com]

Congratulations :D
Ill keep my hooves crossed for ya ^^

[megadog.livejournal.com]

It all depends on how long you intend to live after you retire, and whether you think you can invest the lump-sum to give a better yield than your pension-fund-managers.

Me? I'm in the fortunate position of getting both a lump-sum [admittedly only aboutn £0.1Million] and a lifetime's pension of 2/3 my final salary if I choose to quit when I'm 65.

[plonq.livejournal.com]

What got me thinking about this is that one of my co-workers who is close to retirement is eligible for a lump sum close to $0.6Million (which works out to about £0.28Million at current exchange rates).

We also have money flowing into a couple of other investment savings, so unless things tank badly, we could end up with close to $1.0Million in retirement savings between the various pension funds and our own savings. If we managed that fairly carefully, it should last us through most of our twilight years (barring a collapse of our currency - in which case we'd be screwed anyway).

[furahi.livejournal.com]

You know? If I settled down 1mil could last me my whole lifetime here (reason for many Americans to retire to Mexico ... or Florda :P)

Lump Sum

[(Anonymous)]

Can you go in and get an estimate both ways? With mine, the lump sum is not competitive. Two other options to consider: 1) annuitizing the lump sum, and 2)getting life insurance to cover the half Sarah would lose. There are ways of protecting the lump sum but if the difference between the monthly payments and the discounted lump is significant, then monthly payments wins. Sarah's Dad

Re: Lump Sum

[plonq.livejournal.com]

My retirement is far enough off that this is little more than a mental exercise at the moment. A lot can (and likely will) change between now and then.

When the time comes I'll probably do the same as most of the folks around here and take the numbers to a financial planner for advice.