Pension Lump Sum Pros & Cons: Take Commuted Value Or Installments?

For those fortunate enough to have a pension, one of the trickiest election-option questions is whether to take the pension as a lump sum, or to opt for installment payments instead. The so-called "lump-sum" option -- also known as the "commuted value" or the "net-present value" of the pension -- is an option that involves the employer or pension company paying the retiree a (usually large) one-time payment. This payment is considered payment in full for the value of the pension. The option removes the employer or pension company from any future interest -- or risk -- in the pensioner's retirement. This option stands opposed to the installment-payment option. On this alternative, the employer or pension company pays the retiree in (smaller) periodic (often monthly) payments. These payments are usually -- but not always -- received by the pensioner over the course of the rest of his or her life. In this video, I survey some of the common reasons advanced in favor of taking the pension value as a lump sum, as well as some of the common reasons for selecting installments, instead. For the purposes of the presentation, the question posed is: "Should I take my pension as a lump sum?" The "yes" answer is therefore framed as the "pro" position, while the "no" answer is understood to represent the "con" or "contra" position. Six (6) reasons are put forward in support of each position. Pro Lump Sum: ----------------------------- (1) Flexibility (2) Possibility of Maximizing Return (3) Ability to "Create Your Own Pension" (4) Capability of Leaving Legacy (5) Installments May Not Keep Pace With Inflation (6) Pensions Can Be Lost Contra Lump Sum: ----------------------------- (1) Invested Lump Sums Have Market Risk (2) You May Not Have a Good Trading Record (3) Lump Sums Require More Financial Discipline & Planning (4) Lump Sums Potentially Have Bigger Tax Consequences (5) You May Not Understand How the Lump Sum is Computed (6) The Life-Expectancy Assumptions May Be Wrong For You Disclaimer: I am not a financial adviser or retirement planner. This video is intended for general informational or entertainment purposes only. Nothing herein should be construed as financial, insurance, investment, legal, retirement, savings, tax, or any other sort of advice. If you need personalized evaluations or recommendations, consult licensed experts in your area. For further reading, please visit: http://www.insuranceprescription.com/