As employers are looking to reduce pension plan liabilities, more and more participants are being given the option to receive a one-time lump sum payment from their pension plan in lieu of receiving monthly annuity payments for life. Deciding on which form of pension benefit to take is a very important decision that requires careful consideration. Unfortunately, there is no one-size-fits-all answer. While a lump sum may make sense for one person, it may be a serious mistake for another. And it is a decision that you will have to live with for the rest of your life. Anyone who accepts the lump-sum offer will lose the benefits of a lifetime income stream and will be responsible for taking care of their own investments and making sure the money lasts through retirement.
This fact sheet will briefly discuss the benefits and risks of lump sum and annuity payments in order to help you achieve a better understanding of your payment options.
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Pension Action Center, Gerontology Institute, University of Massachusetts Boston, "Lump Sum vs Annuity Payments: Which is right for me?" (2017). Pension Action Center Publications. 18.