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Lump Sum or Annuity Payments – What’s Your Pension Strategy?

Introduction to Your Pension Choices

If your income in retirement includes pension payments, it’s crucial to understand the decisions you need to make before those payments begin. What is your pension strategy? Some companies offer traditional annuity payments, while others allow a lump-sum distribution. Each choice has significant implications for your financial and maybe, if you’re married, for the rest of your spouse’s life as well.

Understanding Annuity Payments

An annuity pension provides monthly payments for the rest of your life and possibly for your spouse’s life too. This option offers a potentially guaranteed income, with the investment decisions handled by the company. It’s ideal for those seeking a hassle-free income during retirement. However, there are risks involved, especially if the pension fund is mismanaged or exceeds the protection limits set by the Pension Benefit Guaranty Corporation (PBGC). Additionally, without a cost-of-living adjustment, your payments may not keep up with inflation.

The Flexibility of a Lump-Sum Distribution

Alternatively, a lump-sum pension allows you access to all your money at once, giving you the freedom to manage it as you see fit. This route is attractive for its flexibility and the possibility of passing the principal to heirs. However, it requires sophisticated money management to ensure that your funds last throughout retirement. Interest rate fluctuations can also impact the value of the lump-sum, making it a riskier option if not managed correctly.

The Impact of Interest Rates on Pension Decisions

Interest rates play a crucial role in determining the attractiveness of a lump-sum pension. Recent increases in rates can decrease the value of the lump sum, making this option less appealing. A slight change in the discount rate can significantly affect what you receive.

How Can Accardi Financial Group Assist You?

Choosing the right pension option is critical, as it will greatly affect your financial stability in retirement. Before making a decision, it’s advisable to consult with a financial advisor from Accardi Financial Group. Our experts can provide calculations and advice to help you choose the path that best suits your financial goals.

At Accardi Financial Group, we specialize in helping clients navigate complex financial decisions every day. Whether you’re considering an annuity or a lump-sum distribution, our team is here to provide the expertise you need. Contact us today to discuss how we can help you prepare your financial future in retirement.

Important Information

The information provided should not be considered specific tax, legal, or investment advice and is not specific to any individual’s personal circumstances. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. 

Different types of investments and/or investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or investment strategy will be profitable for a client’s or prospective client’s portfolio, thus, investments may result in a loss of principal.

This material was prepared by Lucia Capital Group.

Danielle Accardi is a registered representative with, and securities and advisory services offered through LPL Financial, a registered investment advisor and member FINRA/SIPC. The investment professionals are affiliated with LPL Financial and are conducting business using the respective names Lucia Capital Group and Accardi Financial Group which are separate entities from LPL Financial. LPL ART-598521 (07/24)