If you have a pension at work, take heed of this advice.
When you’re ready to retire, you may get a pitch about moving your retirement money out of your employer’s plan.
Why lump sum payouts can be dangerous
Third party financial companies are getting retirees (or near retirees) to take lump sum cash payouts instead of a lifetime payout of their pension.
At GM, 1 in 3 retirees take the lump sum instead of lifetime payouts. In many cases, this kind of pitch is leaving a retiree impoverished who would have otherwise been financially comfortable over his or her lifetime.
When should you ever take the lump sum upfront over the steady stream of the pension? Almost never. The only exception might be if you are retiring and let’s say you have a terminal illness. Other than that, take the pension.
You will never be able to convert that lump sum into a level of stable lifetime income that you would get from that pension.
So avoid the lure of the pile of cash and make sure that you turn that into a lifetime income so that you never outlive your money.
ARTICLE: Read contributor Wes Moss’ response, When You Should Take the Lump Sum Over the Pension.