"Whenever I hear about someone getting a pension from their job, I'll admit - I feel a little jealous. Other than Social Security, every dollar I'll have in retirement is money I'll have to save on my own. Of course, that's the reality for most workers today. Private-sector pensions have mostly disappeared, replaced by 401(k) plans that put the burden of saving squarely on employees. If you're lucky, your company might chip in with a match."
"The choice between a pension payout and a lump sum really depends on one thing: your life expectancy. To figure it out, calculate your break-even age - the point where the total from monthly payments equals the lump sum. For example, $100 a month versus $24,000 upfront works out to 240 months, or 20 years. That means if you start at 65, you'd break even at 85."
"If you think you'll live beyond 85, go with the monthly checks. If not, the lump sum may be smarter. Still, it's not just about math. The monthly payout offers stability - guaranteed money for life, no matter what. But a lump sum gives you flexibility. You can invest it, grow it, or use it for something meaningful right now - like taking that once-in-a-lifetime trip while you're still healthy enough to enjoy it."
Private-sector pensions have largely disappeared, leaving many workers responsible for their own retirement savings through 401(k) plans or self-employment. A pension beneficiary can choose guaranteed monthly payments or a lump-sum cashout. Calculating a break-even age shows when total monthly payments equal the lump sum; for example, $100 per month versus $24,000 equals 240 months (20 years), breaking even at age 85 if payments start at 65. Monthly payments provide lifetime stability and predictability. A lump sum offers flexibility to invest, grow, or spend now. The optimal choice hinges on life expectancy, priorities, and financial considerations like returns and risk tolerance.
Read at 24/7 Wall St.
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