Not affiliated with The United States Office of Personnel Management or any government agency

Not affiliated with The United States Office of Personnel Management or any government agency

annuities

Annuity Versus Lump Sum

[vc_row][vc_column width=”2/3″ el_class=”section section1″][vc_column_text]Here we look at the difference between an annuity and a lump sum. If you have a pension plan or you are among the few who are lucky enough to win the lottery, you will have to decide whether you want your money in an annuity or lump sum.

Annuity vs. Lump Sum

An annuity is a payment that is made in equal intervals. These steady payments can be made annually or monthly. This allows you to collect portions of your money yearly, or monthly over a period of time.

Lump-sum, on the other hand, is a payment that is processed one time, rather than over a period of time. This allows you to collect all your money in one payment.

Pros and cons of annuity and lump sum

 Pros of an Annuity

-Your spouse or a different beneficiary may be able to get this lifetime pension if you pass it down to them

– You will have a whole lifetime income.

Cons of an Annuity

-Your financial stability may be lessened with annuities.

-In death, some annuities may not pay benefits to your beneficiaries or family.

-If you, unfortunately, get sick, the annuities may not be able to cover the medical bills.

-Sadly, you could die before collecting all the money that is owed to you.

Pros of Lump Sum

-Large amounts of money can be pumped into investments earlier.

-Debts can be paid quickly if you have any.

-The remaining amount can be passed as an inheritance.

Cons of Lump Sum

-Due to poor management, the money could end up running out before you die.

It is wise to analyze your situation as well, even after weighing the pros and cons. In this analysis, there are three important factors to consider.

Of the three factors, life expectancy is the most important one. If you have a good reason to believe that you and your spouse will live well beyond life expectancy or if your healthy, the monthly payments might be better for you. This can also work if your spouse is younger than you. On the other hand, the lump sum option could work better for you if your health is poor, and you don’t see yourself living beyond life expectancy. Still, it will be wise to overestimate your life expectancy in case you outlive what you expected, better than running out of cash ten years earlier.[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_single_image image=”37216″ img_size=”292×285″ style=”vc_box_shadow”][/vc_column][/vc_row]

Search for Public Sector Retirement Expert.

Receive the Best advice.

PSR Experts can help you determine if Public Sector Retirement is right for you or if you should look for alternatives.

The Best Advice creates
the best results.

Recent Articles

Seven TSP Fund Allocation Strategies Federal Employees Are Using to Strengthen Their Retirement Portfolios

Key Takeaways Diversifying your TSP funds can minimize risks and enhance growth potential for your retirement savings.Your allocation strategy should...

Military Buyback for Federal Employees: Is It Really Worth It? Here’s What You Need to Weigh Up

Key Takeaways: The military buyback program allows federal employees to count their military service toward their civilian federal retirement, potentially...

Survivor Benefit Elections Can Affect More Than One Generation—Here’s What You Should Consider

Key Takeaways Your survivor benefit election can shape the financial security of your spouse and dependents for decades after your...

Search For Public Sector Retirement Expert

Receive the Best advice.

PSR Experts can help you determine if
Public Sector Retirement is right for you or if you should
look for alternatives.

The Best Advice creates

the best results.

Subscribe to our Newsletter

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Our Readers Deserve The Best PSHB and USPS Health Benefits Guidance

Licensed insurance agents who understand PSHB, Medicare, and USPS Health Benefits Plan are encouraged to apply for a free listing.

Book Phone Consultation

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Get In Touch

Stay up to date on the latest information about Public Sector Retirement.

The Best Advice Creates The Best