Lump-sum payments give you more control over your money, allowing you the flexibility of spending it or investing it when and how you see fit. It is not uncommon for people who take a lump sum to outlive the payment, while pension payments continue until death.

A lump-sum distribution is a one-time payment from your pension administrator. By taking a lump sum payment, you gain access to a large sum of money, which you can spend or invest as you see fit. “One thing I emphasize with clients is the flexibility that comes with a lump sum payment,” says Dan Danford, CFP®, Family Investment Center of Saint Joseph, Missouri.

A pension payment annuity “is fixed (occasionally COLA-indexed), so there is little flexibility in the payment scheme. But a 30-year retirement probably faces some surprise expenses, possibly large. The lump sum, invested properly, offers flexibility to meet those needs and can be invested to provide regular income, too.”

Your decision may affect your children, as well. Do you want to leave something to loved ones after your death? Once you and your spouse die, the pension payments might stop. On the other hand, with a lump-sum distribution, you could name a beneficiary to receive any money that is left after you and your spouse are gone.

Source: Investopedia

Delaying the start of pension withdrawals makes sense even if you choose the annuity option. You may be able to retire at age 60, but that doesn’t mean you have to start your pension at 60. Many pensions—although not all—offer substantially higher payouts if you begin benefits at a later age. You might be leaving money on the table if you haven’t analyzed the payout options and you start your pension early.

Even if you have to withdraw from your savings a little to make up for the delay, waiting might still be the more attractive option to increase payouts and reduce your risk of running out of money in retirement.

Source: The Balance