The retiree is given the chance to choose what is best for them. It is not an easy task because when you make the wrong decision you may misuse or fail to benefit from your pension. The following are key factors to consider when choosing between lump sum or monthly pension.
Find out what is offered in addition to the cash
Sometimes companies continue to offer medical covers, travel allowances, and bonuses to their employees when they retire. You should find out if your company offers such, or if they only give cash. If it offers such benefits you may consider the monthly pension so that you continue enjoying the benefits.
Consider your wealth transfer plans
In this you should consider what you need to leave your loved ones with in case you pass away. If you need them to get the whole pension, you should consider the lump sum payout so that when you die they can get all your pension. When you choose the monthly pension they will stop getting it when you die.
Analyze your investment plans
Many people consider investing their pension so that it can provide them an alternative source of income since they no longer have a salary. You should analyze what you intend to invest in, and the capital it needs. If you plan to invest in huge-capital investments such as real estate you may consider the lump-sum payment.
Tax benefits
In many insurance companies, pension is taxed when it is on a monthly basis. You should calculate what the tax will cost and compare it to getting a lump sum payment that will be taxed. If your company taxes lump sum payment you should compare the tax with that of the monthly payment.
What assets do you currently have?
Many people invest early before they can retire. Before choosing how to get your pension, you need to understand the investments you have and what they require. For instance, if you have rental houses that bring a good monthly income, you may consider taking a lump sum amount so that you can invest more. Besides, you can consider taking a loan from a bank so that with monthly pension together with your other earnings you can repay the loan.
Conclusion
When dealing with your pension, you need to have high self-discipline. Your pension can determine the legacy you will leave behind. Therefore, you need to consider all those factors and ask crucial questions when choosing between lump sum or monthly pension. When the decision making process becomes a hard nut to crack, you should consider paying a visit to a financial adviser.
Please share this article with your friends on social media platforms so that they can gain more knowledge on pensions before they get there. They can succeed with these tips, and their success will mean your success.
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- Adams Media Corporation
- Emily Guy Birken
- Publisher: Adams Media
- Suze Orman
- Publisher: Hay House Inc.
- Hardcover: 320 pages
- Larry Swedroe, Kevin Grogan
- Publisher: Harriman House
- Edition no. 1 (01/07/2019)
Last update on 2020-03-19 / Affiliate links / Images from Amazon Product Advertising API
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