Should I Take The Lump Sum Retirement Option?

Should I Take The Lump Sum Retirement Option?

Listen to how ordinary people built extraordinary wealth—and how you can too. You’ll learn how millionaires live on less than they make, avoid debt, invest, are disciplined and responsible! Featuring hosts from the Ramsey Network: Dave Ramsey, Ken Coleman, Christy Wright, Rachel Cruze, and John Delony.

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[Jamesdave-gm]

I came across your channel through this video—case studies are incredibly valuable, and I'm eager to see more in the future! Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments.

[barttfisher]

I am unsure if my 401(k) and IRA will provide a stable future. i need an approach that will align with my risk tolerance and financial goals, i set aside $1m to achieve this. Do you suggest i get into stocks or buy a rental property?

[ozarked]

For me, always take the lump sum. You can run all the different math calculations you want. The bottom line is you do not know at what point in time you are going to die. I want control over the money. I want control over how it is invested and distributed.

[philipepling]

Never, ever, take the monthly payments option. Not only does the lump sum stay in your family after your death, but it puts you in the driver's seat of your life. Your pension payments are pulled from an account that does NOT have enough money to make all of the payments they've promised to make. If everything is OK forever, this won't be a problem because the company has the rest of your life to come up with the cash each month. If the investment manager of the pension fund makes bad decisions and loses a lot of money or if the company winds up being mismanaged and goes under, those future payments are now in jeopardy. The fact that you are owed a set amount per month means nothing if there is no cash to give to you.

Take the lump sum and you are guaranteed to get everything you are owed.

[darlenepaul]

Dave's knowledge and advice are PURE GOLD!!!

[judithclerici]

Index invest, diversify by sector and country, use registered accounts first (exclusively), stay away from margin, dollar-cost-average, wait 20-30 years....profit. Its still shocking that investing is not really taught at the high school level. If I knew at 19 what I know at 40 would have been easy peasy.

[waterheaterservices]

'Go on, take the money and run."

[rickymago]

I’m surprised he didn’t ask her what the monthly amount would be.

[linuxsurfer]

You should almost always want control of the money. $1.6 million is guaranteed if you take the lump sum. If you take the payouts, they can change the deal later, and you have no control over it.

[deanalbertson]

In my opinion, diversify with mutual funds: Dividend Stocks, Corporate Bonds, International, and more.

[rhammond]

I would pack up from NY, go to Florida (save on state taxes and cost of living), and pay myself $5k a month to live like a king.

[Fell]

My public pension pays 17.5% annually of what the lump sum would have been. Passed on to my spouse when I die. COLA adjusted also.

[Sky]

Dollar is collapsing. A decent monthly pension today might only pay for a tank of gas tomorrow.

[thelogicaldanger]

I had a similar offer when my company was bought out (well, I was only being offered $40, 000 vs a lifetime pension when I turn 65.) The fact that my company was pushing it so hard, made me think very carefully about it. A little math, I quickly figured out if I lived to the average age of 78 (and a few years below that), I would be better off taking the pension than the lump-pay out. Sure, if I die today, I get nothing. But statistically, I won't. Which is why the new company was hoping to get rid of the pensions by offering buy-outs to people. Now, I was, and am, completely debt free. If I had debt at the time, I may have made a different decision, in order to pay off the debt.

[keithmachado-ppfv]

Some of the big financial stocks have still not fully recovered from 2008. Bank of America went from $52 to about $3 and just recently hit $40 for the first time since 2007, still needing a 30% gain to get back to peak. It has paid a dividend of about 3% all those years.

[lkjg]

You cannot compare the two options (lump sum or pension payments) without knowing both sides of the equation. Dave immediately goes to the "take the lump sum" route without asking about the pension payment amounts. Another fact: the great unknown factor in this equation is how long the recipients will live. Pension planners, social security, insurance actuaries, etc., all use some type of actuarial tables to base their payments. "The Money Guy Show" has a very good discussion on this subject and actually goes into the mathematical calculations.

The Secure Act of 2019 also changed the inheritance rules regarding IRA's, eliminating the "stretch provision" of 401k's and establishing a ten year window for 401k distributions. This means that withdrawal strategies should be a discussion in the overall retirement framework.

[gregtaddeo]

The future payment on the pension monthly is much higher than the lump sum.

[sd]

Would this be the same with an annuity?

[RCPMMaryland]

Regarding generational wealth, once that IRA is passed to his kids, they will have 10 years to drain that account, pay taxes and either sit on that pile of cash or re-invest for their future.

[kevincasey]

As a soon retiree, keeping my 401k on course after a rocky 2024 is top priority. I have been reading of lnvestors making up to 250k ROI in this current crashing market, any recommendations to scale up my ROI before retirement will be highly appreciated.