Call Now: 1-800-566-1002

Investing in a Lump Sum or an Annuity

An annuity payment is often made in multiple installments over time. These payments could be on a monthly, quarterly, or annual basis. A lump sum allows all your money to be collected at once.

Annuity payments will provide you with a steady source of income for the remainder of your life. These payments (or a portion thereof) may be passed on to your spouse in certain cases.


Employer Annuity vs Lump Sum Option

If your employer offers a traditional, defined-benefit pension plan you might have to make tough decisions when you reach retirement. You have to decide whether you want to take a lump sum, or choose monthly annuity payments for your entire life and that of your spouse and/or beneficiaries.

After considering the pros and cons of each option, you need to evaluate your own situation. An easy comparison of the monthly payment amount and what you think you could earn by investing the lump sum at the same risk level is the best way to analyze your situation. This analysis should consider three factors: life expectancy and return on investments.

Annuity or Lump Sum Benefits

The decision to choose a pension annuity option over a lump sum option is often based on which option will provide the highest income. This is true even if all other factors are considered in the due diligence process. When weighing the pros and cons between annuities vs lump sums, it is important to consider your investment capabilities. If you are an expert in investing and the financial markets, taking a lump sum payment is a smart move. You can then reinvest it.

Lump Sum vs Annuity Offers from your Employer

if you are healthy and have good reasons to believe you or your spouse will live longer than the average life expectancy. Your spouse might be significantly younger than you. Your annuity payments will cease when you die unless you select a survivor benefit, term certain option, or a term certain option. Survivor benefits allow your heirs to receive annuity payments for the rest of their lives after you pass away. The term certain option allows you to receive payments that decrease in monthly installments, but will continue to your heirs in case you die.

If you have sufficient retirement income, whether it is from Social Security benefits or other lifetime income, you can choose to take annuity payments or a lump-sum and invest the money for yourself and your heirs.