Pension Buyout Options: Which is Best?

All right, welcome back folks. Now I want to talk about pensions. Now I know oftentimes they’re pretty hard to come by in today’s day and age. But if you have one, you want to stay tuned because I’m going to be talking about all things pensions and how to navigate those different pension buy out options that you have. Generally when you have a pension, you have a couple of different options, actually two, okay? Option one would be you could take a lump sum and that’s where the company pays you a lump sum of money and you’re done with it. That’s what you’ve got, okay? But what most people find or most people relate to pension is that monthly income stream. So that’s option two, okay? And what that entails is the pension will pay you a monthly income guaranteed based on the backing of that company for the rest of your life. Now typically with that, the payment doesn’t go up. It doesn’t change whatsoever. It’s a flat payment for the rest of your life. So that’s the options that you can take. Do I take the lump sum or do I take the monthly pension payout? So each option has its pro the monthly pension payout? So each option has their pros and cons. So let’s start with that lump sum. The pros for that is that you gain control of those assets right then and there. So you take that lump sum whether it’s $200K or $300K whatever it might be and you roll that over into an IRA. And you have control over those assets. You can invest it however you want. Okay, another pro about that pension lump sum is that heaven forbid something were to happen to you early in retirement let’s say. Let’s say you passed away, okay? Well you would be able to name beneficiaries and they would be able to inherit that lump sum of money. Now let’s talk about that pension monthly installment plan. Pros for that, it’s peace of mind, right? You get that guaranteed income for the rest of your life. You can count on that. You know what it’s going to be month over month and you can plan for it. Another benefit of that is you don’t have to worry about investing that lump sum in the market, right? You know you’ve got that steady monthly income coming in. However, there are some disadvantages to that pension monthly income installment plan as well. One of those being, what about inflation? If you know your pension is going to pay you $1500 a month, let’s say for the rest of your life, 20 years from now, is that $1500 a month going to be the same? Yes it will be, but bread and milk are going to cost more, right? And that’s not a bad thing, it’s just something we need to plan for as well. The big thing that most people walk away from this is, whatever option you choose, make sure you have a plan for it and make sure that that option gives you the most peace of mind as you go into retirement. So if you have questions and you have a pension and you want to know which option might be best for you, please don’t hesitate to reach out to the number on the screen. Give us a call. We’d be happy to go over those different pension options with you and determine which one makes the most sense for your situation.