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 My job is asking me to retire early – should I opt for monthly income through my pension or take a lump sum?

My job is asking me to retire early – should I opt for monthly income through my pension or take a lump sum?

If you’re like most people, you have a whole lot of questions about how to save, invest, and prepare for retirement – including questions you haven’t even thought of asking yet.

You probably also have some sort of shortfall that needs to be addressed immediately so you’ll reach your financial goals upon retirement (or be damn close to them).

And no matter who you are, your financial plan should be periodically monitored and adjusted based on the economy, the markets, and your needs.

So, I’m going to answer the five most common questions I get from clients again and again as they map out their journey to a comfortable retirement:

  1. Should I pay off debt first before I save and invest?
  2. Should I be saving for my children’s college or my
    retirement?
  3. What should I do with my old retirement plan?
  4. My job is asking me to retire early – should I opt for monthly income through my pension or take a lump sum?
  5. My spouse will still need that money when I die. What
    happens to it?

Today, we’ll tackle #4: My job is asking me to retire early – should I opt for a monthly income through my pension or take a lump sum?

That’s the choice many workers are left with when they retire or are offered an early buy-out. With the Federal Pension Guarantee Corp being insolvent (that means they’re broke!), I would be very careful about taking your company pension.

As we see in the news right now, when companies go belly-up (that, too, means broke!), people are seeing their pension cut by more than 50 percent in the snap of a finger.

Many times, that reduction in income happens to people while they are retired. The results are catastrophic, as they’ll never be able to recoup the lost income, and they are often forced to find a low-wage job to cover the shortfall.

Their dream of a comfortable retirement just turned into a financial nightmare. With companies and local governments facing severe financial issues at an alarming rate, I believe we will hear about this more and more.

So, the better option is to take the lump sum payout and then manage your money correctly independently (outside of that pension). I can research all of the options for you, finding our own pension that will provide a lifetime of income annuity for you.

We can also analyze the different insurance companies to ascertain which one has the highest payout for you. Like we talked about before, there are plenty of “bells and whistles” to these annuities, such as inflation riders, which we can go over together.

Contact me if you’d like some individual analysis of your situation and sound financial advice!