A pension lump sum or monthly income, which is right for you?

The answer depends mainly on your financial situation and goals, but also the
fiscal health of the pension plan.

We have helped many clients review their options for this important decision. Below are some basic considerations.

Pension plans offer monthly income for an employee’s life and may pay continued income to a surviving spouse. Benefits generally are fixed and do not get adjusted for inflation, though the cost of living may rise.

A lump sum option can provide an employee the flexibility of access and control of their money. This can become even more important when unexpected financial needs arise.

If you take a lump sum, proceeds may be invested immediately with the aim of sustained growth. If investing, you will want to consider your risk tolerance, goals and the return potential.

Do you have enough income from other sources to cover basic expenses?

If the company from which you receive pension benefits defaults on monthly payments, the Pension Benefit Guaranty Corporation, a U.S. Government Agency, may only pay a portion of the monthly benefit.

If you do elect to take a lump sum pension payout, you are eligible to roll the proceeds directly into a traditional IRA to defer taxes.

There is no “one size fits all” answer to taking a lump sum payout versus receiving the pension payments as an income stream.

Do you need the consistency that monthly pension payments provide, or would the flexibility and control offered by a lump sum payout be more beneficial? It is important to understand and consider your own financial situation including other assets, income, health, and risk tolerance as well as employer solvency, estimated investment returns and goals while making your decision.

You have options and it’s important to understand them.

Contact us today at 207-376-3160 or to set up an appointment for your complimentary consultation. Or use the form below.

Disclosures: No strategy assures success or protects against loss. Past performance is no guarantee of future results. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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