Should I Take My Pension In Payments Or As Lump Sum? (BEST CHOICE)
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- čas přidán 20. 07. 2024
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Choosing the correct option between the lump sum or monthly pension can have a profound impact on your retirement. This decision is not one to take lightly, as it can shape your financial stability for years to come.
In this video, Alex breaks down the factors to consider when making this crucial choice, providing insights and real-world examples to help you navigate the decision-making process with confidence.
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0:00 - Overview
1:25 - How to calculate which is better
2:08 - Influencing factors
3:52 - My clients' real numbers
9:50 - Creating income from the lump sum
In my case as an advisor, my client's ability to manage their money well is a huge factor I consider when making this decision. The numbers are the numbers, and people can try to maximize all they want, but it all falls apart when people start spending A LOT more money than they should if they want sustainable withdrawals. As the video plays I see that you did address this. I just see so many videos on YT that completely ignore the human factor. Some people are terrible with lump sums. Unless the lump sum number is extremely compelling I'm inclined to suggest they keep the pension.
Just the other day I had a client tell me that purchasing his variable annuity (that a previous advisor had sold him, but that I help him with) was "the best financial decision he's ever made". He's blown through his IRA and other liquid money because he simply can't manage his finances. That was the first time in 15 years I'd ever heard anyone say they loved their annuity.
When I retired, there was no choice between lump sum and monthly. I’m fine with my monthly.
I also have my monthly Social Security payments .
Great video. I recently retired and after doing the math which was a toss up, I decided to take the lump sum. My monthly with 50% joint and survivor was higher than your example but at the end of the day, I did not want the forced income and took the lump sum, rolled it over to an IRA and invested in fixed income averaging 5.6%. The income generated is less than my lump sum by about 20% (not counting taxes in either case) but I don’t need the money so I would rather have control of the money and ability for my heirs to inherit it.
I meant the lump sum income is 20% less than the monthly
Nice! Congrats on retirement! 🎉
One other point. Taking the lump sum can allow you to take out more early on and defer SS to age 70. The COLA on SS is a good hedge combined with the lump sum, with one benefitting from a longer life and the other benefitting from a shorter life.
Yes, great point! I talk a bit about that in this video around the 10:30 mark czcams.com/video/Ukdkb5hR7bM/video.htmlsi=gpwla8bcGlqK3xaO
Great video. TY
Thanks for watching! Glad you found it useful. - Alex
We already had allot Invested outside of work in the stock market. The Guaranteed Pension pays all our monthly bills, barley, (Note: We have Zero Debt). Our IRA's were basically the Go-Go-Years Fun Money. We took the Pension for that reason. We have 50% of our IRA's in a S&P Index Fund, 25% in Bonds and 25% in Cash. We will not turn on Social Security for 5 more years at FRA. That is back up number 3. We could be wrong, but that is our plan. Next update, Year 2040.
Thats great! Speaking of having all your equity money in the S&P500, you may find this video useful: czcams.com/video/6_md8q5pDng/video.htmlsi=d87F9J9SlameAVKo
I’m in the same boat and will take the pension with survivor benefit.