Pension – Lump Sum Payout vs. Pension Payment for Life

I have seen a growing trend where company pension plans are offering clients the choice to take a lump sum as a transfer into an IRA account.  Pensions are expensive to manage and administer as well as ensuring the guarantees, so companies have started to unload them on their employees.  Some companies, in fact are not even giving their employees a choice; they are simply telling them that the plan is closing out, how do you want your money in the next 60 days?

Generally, if a client is under the age of 55, this can be a positive benefit as most pension income payments will not keep up with inflation.   The ability to invest in an IRA or to buy your own annuity with guarantees and better pricing can offer a hedge for future inflation and its effects on fixed income payments in retirement.

This article published in Forbes illustrates the impacts of inflation during retirement and how forced to make a choice with your employers pension plan could prove fortuitous to invest on your own:  https://www.forbes.com/sites/robertlaura/2018/04/30/how-inflation-can-ruin-your-retirement/#5b0a9b6d4bde