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Question for the Money Doctors

Question submitted on Oct 8, 2019.

Question

I'm trying to decide if a lump sum payment is better than an annuity- two different options in a pension plan settlement. In a low interest rate environment, what factor should I consider?

Answer

There are a lot of options, including the two that you mentioned: lump or annuity (typically lasts your lifetime or your spouse's lifetime).  There are many variations of these options, including: part lump / part annuity, roll the lump into an IRA, and pick your own annuity.  This is a big decision and the interest rate is just one part of the calculations.  A CPA/PFS in your area can help (visit https://www.cpapowered.org/find-a-cpa to find a specialist in your area).  Be prepared to share your age and your spouse's age.  Best of luck.


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