Increasingly, employees with pensions have a difficult choice: take their pension as a lump sum or monthly pension payments.
Here’s a pension calculator I mention in the video:
► Announcing THE RETIREMENT ADVENTURE CLUB!
We’ve launched an online membership designed to help you plan for retirement and connect with others who are asking the same retirement questions you’re asking right now.
The Club will feature access to RightCapital financial planning software, a growing library of financial planning checklists, online courses, and regular access to me and the team during live-streamed office hours calls.
To learn more, visit our website:
*** Free Guide ***
#pranawealth #patrickking #howtoretire #retirement #retirementplanning #pensionlumpsum #lumpsum
— About Patrick King CFP® —
Patrick King is a fee-only financial advisor in Atlanta and the Founder of Prana Wealth. Over his career, Patrick has helped CEOs, all-star athletes, Grammy-winning artists, and many others build their wealth, retire sooner, and create a legacy. Patrick enjoys yoga, mountain biking, golf, travel photography, and Clemson football.
Let’s connect:
LinkedIn – PatrickBKing
Facebook – @pranawealth
Instagram – @pranawealth
Twitter – @PranaWealth
———-
DISCLAIMER: This is a publication of Prana Wealth Management LLC. All opinions of the authors expressed herein are as of the date of publication and are subject to change. Any information presented herein is not an offer to buy or sell, nor a solicitation to buy or sell any securities or products mentioned. Any investment, tax, legal, or estate planning or information is to be considered general in nature and is not intended as personalized financial planning advice. Always consult a financial, legal, or tax professional regarding your specific situation. Different investments have varying degrees of risk and there is no assurance that they will be suitable for a particular person’s portfolio. Past performance is not indicative of future results. Prana Wealth Management LLC is a registered investment adviser in the state of Georgia and other states where it is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement from securities regulators. Prana Wealth Management LLC receives compensation from YouTube for the presence of advertising before, after, and during this video content. Prana Wealth Management LLC does not control the content or presence of any advertisements. The presence of any advertisement does not constitute an endorsement of the ad, company, entity, or product by Prana Wealth Management LLC.
———-
CONTENT DISCLAIMER: The views and opinions expressed through this media or in comments on this channel are those of the creators and do not necessarily reflect the views and opinions held by this channel’s broadcaster.
Due to the social nature of this channel, these videos may contain content copyrighted by another person or entity. This channel’s owner claims no copyright to said content. The broadcaster of this channel cannot be held accountable for the copyrighted content. The broadcaster shares and strives to verify information, but cannot warrant the accuracy of copyrights or completeness of the information on this channel.
Any copyrighted material shared on this channel is intended to be shared by Fair Use. If you have a complaint about the use of copyrighted material, please contact the broadcaster prior to making a copyright claim. Any infringement is unintentional and will be rectified to all parties’ satisfaction….(read more)
LEARN MORE ABOUT: Retirement Annuities
REVEALED: How To Invest During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
Lump-Sum or Monthly Pension: Which Is Right For You?
Planning for your retirement is a crucial step in ensuring financial security for your golden years. One of the most important decisions you’ll face is whether to receive your pension as a lump sum or as a monthly payment. Both options have their own advantages and disadvantages, so it’s important to carefully consider which one is the best fit for your situation.
Lump-sum pension allows you to receive the entirety of your pension as a single payment, usually upon retirement. This can be a tempting option for many individuals as it provides a large sum of money upfront and offers full control over how it is invested. By receiving a lump-sum, you have the flexibility to allocate the money in various investment avenues, such as real estate, stocks, or even starting your own business. If you are confident in your ability to manage finances and desire the potential for higher returns, this option may be suitable for you.
On the other hand, monthly pension payments provide a steady and guaranteed income stream during your retirement. This option ensures a consistent cash flow to cover day-to-day expenses, making it ideal for individuals looking for a sense of financial security. If you prefer a more predictable form of income and do not want to deal with the risks associated with investing a lump sum, opting for monthly pension payments might be the safer choice.
Another crucial consideration in choosing between a lump-sum or monthly pension is your life expectancy. If you have a longer life expectancy or have a strong family history of longevity, monthly payments may be advantageous. This is because it guarantees an income for as long as you live, helping you maintain a comfortable lifestyle without the risk of outliving your savings. However, if you have a shorter life expectancy or wish to leave a substantial inheritance to your loved ones, a lump-sum payment might be more suitable.
Furthermore, it is wise to take into account your personal financial goals and circumstances. If you have significant debts or substantial expenses coming up, a lump sum can provide immediate relief and allow you to settle those obligations. Conversely, if you have a secure financial situation and have no pressing financial burdens, monthly payments can serve as a reliable source of income.
It’s also worth noting that some pension plans offer the option for a combination of both lump-sum and monthly payments. This can provide a balance between the two choices, allowing you to enjoy the benefits of both worlds. For instance, you can take a portion of your pension as a lump-sum for immediate needs or investments while receiving monthly payments to support your regular expenses.
Ultimately, the decision between a lump-sum or monthly pension depends on your individual circumstances and preferences. It is crucial to carefully evaluate your financial goals, longevity expectations, risk tolerance, and current financial obligations. Seeking advice from a financial advisor can also be beneficial in understanding the pros and cons of each option and determining which is the best fit for you.
Choosing between a lump-sum and monthly pension is a significant decision that will impact your financial well-being in retirement. Take the time to thoroughly assess your options, weigh the benefits and drawbacks, and make an informed choice that aligns with your long-term goals and financial security.
ROCH DUNGCA-SCHREIBER helped me achieve my retirement goals with her personalized advice and support.
Sorry, bank rate calculator is WORTHLESS.
Lump sum opens you up to creditors and lawsuits if you file for bankruptcy or someone suing you.
I worked for 13 years from 1990 to 2003 , me and my employer were paying into pension,I stopped working at 2003 at age 45 and resided overseas, now I am 62 .. am I entitled to any pension,and if so, what are my options? .. Thank you
What I would do with the lump sum is put it into an annuity.
We had to make this decision about seven years ago. Not having issues related to longevity (early death), we ran the numbers. We'd have to earn 7+% on the lump sum to match the annual pension payments. We took the monthly pension. IIRC we need to live to around age 82 to breakeven.
So let say you take the buy out and you retire at 66/67 and you spend out you buy out in 6 years you would be now 72/73 and if you waited to file for your SS income and had paid in the max each year your income would be more than you will need at that age providing you own your home and have no bills out standing. your age is now the factor when you pass on !!! 77 to 84 you will not be living the high life for sure !!!
A monthly guarantee is nice but if you are offered a lump sum, take it, especially if you work for a private company. At the end of my benefit calculation on my company's HR page, it states that the plan can change or cease at any time. I'm sure that is just a legal CYA but for me, take the $ and run. Also, as it gets deposited in your traditional IRA, start paying taxes now on it & move it to a ROTH (but don't transfer too much to throw you in the next highest tax bracket). With more $ in your ROTH, start looking at closed ended funds that pay a monthly divvy. If done right, you can generate more money than the monthly annuity would pay and no taxes!
Had the option to do a lump sum in addition to a pension, but would give up 6% on pension. Was told it would take decades to make up the money by taking the higher monthly.
It is a great addition to the additional IRA I had contributed to. Helped me decide to take SS right away- too much money not going into investments to wait until FRA.
Let me just stop you right there. It took 3 minutes to get to you mentioning IRS. Please put a $ symbol in your subject line. YouTube is global. Just because your presentation is in English, does not mean that here in the UK we can make use of your advice.
I'm going to need to ask these questions when I start this new job that offers a pension.
I have 46years of LGPS coming next year, so thanks for your videos, I have a lot to learn
Boycott fee only advisors! Only use fiduciary advisors!
The other reason …I already have a portfolio of close to $1M.
I retired in Jan 2022. I receive 2 pensions…GE@ 60. NRECA Coop at 62. Both monthly annuities. Why? If I die the week after I receive Lump sum…my wife has to deal w distributions/taxes/ portfolio/CFP. With annuity she receives monthly check seamlessly. I opted for 100% Joint Survivorship.
Great analysis and insight! I happen to have a pension with my employer, but had never considered the lumpsum option. Thanks for this video, I have some personal analysis and thinking to do!
I am in a private pension plan that is ending this year. Employees will have to choose between a lump sum or investing that sum in one of five or six annuity options. The company will then increase 401k match from 6% to 8%. I'm 65, wife is 59. She doesn't plan on retiring for a few years, I just switched to part time. The annuities don't seem like a good investment, according to my very crude math. In my case, what to do with a lump sum? I could find uses for the cash, but I really want to minimize taxes.
In 2014 I turned down, the lump sum of 52k. Not being educated about the pension, I figured I would rather have someone manage the funds for me and later collect the pension at ripe time . I’m 62 , now, logged into the pension, and the NOW PAYOUT LUMP SUM is sweeter and more enticing , 8 yrs later ; it’s about $98k now…in 2022. I’ve been pretty ok managing my IRA s and 401ks – roughly with 10% -11-12% at times , depending on accounts 15-17 % returns …. Now as the interst rates are high I’m seeing a good opportunity to take the lump sum, but I’m concerned about the income taxes now…? As I understand – I can put the lump sum into an IRA ? Possibly in 2023-? I’m currently unemployed , and my accountant told me , if you are not working , you can not put money into an IRA, as it would be a penalty? ….that seems like a -double punishment putting money into an IRA , but due to unemployment status it’s punishable by the IRS.?
I took the monthly payment. I had it directly deposited into my brokerage account, I purchased close end muni funds for 7 years with the monthly pension and dividends. PBGC just took over my pension plan, but my pension is so paltry I get the whole amount. I now have both monthly pension and tax free dividends go into my checking account, which covers my monthly medical expenses, and then some.
I am taking monthly payments now for the last 8 years. My company did not offer a lump sum option. I wish they had.
I'm about to take the lump sum in a couple of months. I only have to make 4.5% per year off it to equal the annuity option, plus I still have the principal. Another plus for the lump sum is that it's inheritable even after both people pass away whereas the annuity is not. If I took the annuity I would only get 85% of it to also have my spouse get the money if I die first. The lump sum has no such discount to cover my spouse.
Lump sum i would only do that if i reinvented it in stocks or real estate for a bigger pay day.
I was notified this week that I have a modest pension from an employer I departed almost 10 years ago. I had worked there for 7 years and was fully vested. I’m given the option for a lump sum or annuity payments (various options, no COLA increases). However, I’m not even 50yo yet.
Do I HAVE to choose an option now? If I wait 10-15 years, assuming the firm remains solvent, will my benefit/lump sum/annuity increase?
I appreciate you are primaliry talking to aU.S.audience but the key to a comfortable retirement is guaranteed income,and not a lump sum
There are plans that allow you to take a set range of the lump sum amount ($10-$50k), and the individual will still receive a monthly 75% joint annuity payment for the primary’s and spouse’s life. This will allow them to play both sides of the fence by having that lump sum directly rolled over to a traditional ira; while receiving a slightly reduced monthly annuity for the rest of their lives.
No brainer, take monthly if your DBPP adjusts with COLA like mine. I can't imagine the bankruptcy of my pension employer unless otherwise, entire country goes bankrupt. Annuity ROI is usually calculated at 4.8% meaning that $1,000/month pension income requires $250K deposit in the life insurance company
I have a balance in my Federal government TSP. It has an annuity option, but you can just treat it like a 401k if you wish. Leave it, withdraw it, move it to another qualified account, or annuitize it. I'm leaving it alone for now, even though I've retired from the government, because I don't need it. In fact, I'm thinking about rolling it over to my SEP-IRA because that account is actively managed. (The TSP is not.)
Am a retired RN, one of the lucky ones who has a pension. Have been receiving it over the last 8 years,since age 55. Claimed Social Security benefits at 62 at the end of 2020. The one-two punch of the pension and Social Security benefits have been a game changer for me. Family emergencies cropped up and it was difficult to save. My former employer was a county hospital and part of the state retirement system.It also offered
a 457 B deferred retirement option plan called DROP,particularly for those retiring under age 55. This allowed one to legally retire,continue to earn wages from their employer, and secure their pension upon complete separation from their employer . The monthly pension amount was determined by pension formula along with the credited service documented upon the date of entering the DROP. Participants in the program either had 30 yrs credited svc ,regardless of age,or were 62 yrs of age with at least 6 years credited svc. Am not wealthy
but healthy financially with my pension,Social Security benefits,and DROP money.
I am considering the lump sum, which I am thinking could be my cash account, so that I would not have to pull so much out of my IRA in a severe down market.
I still can't decide? I will get $1840 p mo or $236K Lump sum?
Does the monthly annuity really mean for life? What I lived to 100 ?
Lump Sum? The right choice for Estate Planning and consider a Self Directed IRA to purchase real estate to balance out stock investments.
Amazing. I just had this conversation with my financial advisor today and this video pops up on my YouTube recommendations page. Fabulous explanation here that really helps me feel better about this decision. Thanks so much.
My wife and I will both have State Pensions when we retire.
Our state Pension allows a Lump sum withdraw but we will not go that route.
What we plan to do is to take the full monthly payment for each of us and increase our life insurances to cover any difference in the event that one of us dies, which will stop the pension payment upon our death.
The key is not having any debt when we retire.
Only one in five spent the lump-sum? I don't know who Met Life polled, but nearly all people will spend the money in a few years if given a lump-sum. My mother retired from the phone company in 1991 when they offered an early retired bonus (added four years of service and four years of age), Several people at the office where my mother worked accepted the early retirement offer. The employer offered a monthly payment or lump-sum. Only my mother took the monthly payment in her office. She met her coworkers a few years later and every one of them had none of their lump-sum left and had to work at another job.
My first job out of college, worked there 1982-93, vested in the pension plan and grateful a lump sum option did NOT exist. Had no idea as an unemployed 33yr old the value of that pension. Started collecting monthly payments at age 58. Now 61 and knowing that company is obligated to pay me for the rest of my life…
I retired 11/30/2018 and took a LS instead of a monthly payment, put the LS money in my 401k so far its grown about 225k, had I taken the monthly pension payment I would have only collected 110k.
Most every financial advisor is going to advise taking the lump sum regardless of how good or bad the amount offered might be. Why? Because now you can give the money to them to invest and they get to earn income on it with you!
What about the fact that a single retiree has no need to worry about spousal survivor-ship benefits and that a monthly annuity payout doesn't allow the retiree to leave anything to their children when they die? Not to mention, a LOT of annuities do NOT have inflation protection provided with them. Taking a lump sum so that I can leave whatever I don't spend to my son, paying a true fiduciary financial management company to manage both the lump sum and my 401k seems best to me. A single person who retires and takes an annuity and then dies quickly leaves a lot of money on the table possibly that would go back to the employer, I'm assuming. There's a lot of these details that you also could have covered. Any chances you could widen the scope of this video to include these kinds of questions?
Many pensions also don’t offer an annual cost of living adjustment (COLA) so you lose purchasing power to inflation over time.
If your pension is with a private company, take a lump sum. You never know if they will go bankrupt. For example, Pan Am went bankrupt and employees lost their pensions.
If you take a lump sum from your pension, you can roll it over to an IRA or Roth.
Another one who only pitches the lump sum option
I'll be receiving a pension from my employer when I retire next year. I don't think they offer lump sum payout out option. My employer is the state of CA. Even if they did I doubt I would take it. I feel more financially secure knowing that I'll be getting that monthly check. Nice video.