How to Choose: $400k Lump Sum Pension or $2k Monthly Income

How do you choose between a $400k lump sum pension payout or a $2k monthly income guaranteed? Here are 5 questions you need to consider in order to make the best decision!
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Mike Bernard, CFP® offers advisory services through KFG Wealth Management, LLC dba Korhorn Financial Group. This information is for general financial education and is not intended to provide specific investment advice or recommendations. All investing and investment strategies involve risk, including the potential loss of principal. Asset allocation & diversification do not ensure a profit or prevent a loss in a declining market. Past performance is not a guarantee of future results.
Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.

[@austinburns4213]

The lump sum definitely has more flexibility until you turn 73 or 75, then RMDs and the tax on RMDs can change the consideration depending on how large your lump sum is. Perhaps take the pension annuity and invest part in a Roth each year? I agree that not knowing whether you or your spouse will die in 5 years pushes us into lower payouts with spousal benefits. My pension has a number of payout options. One is a "pop up" option such that if your spouse dies first, your payout pops-up to the full single life annuity rate. The differential cost for that option is about $30 a month.

[@gtsuby]

Some pension plans will revert back to the Single Life Annuity option should the spouse of the retiree pass away first and Survivor Annuity option was originally selected.

[@manchesterunitedakamrtread8317]

Take the money and buy land or cash house

[@GenoGino222]

After federal taxes on a lump sum and higher tax bracket leaves a balance of $292,000 equals 12 yrs if divided by $2000. Or take $2000 for the rest of your life with spousal protection and pay just normal taxes as you withdrawal

[@PorscheSpeedster-kz6nc]

It’s only Math!!!