Lump Sum Retirement Option

  • Dear Dollar Stretcher,

    This is a question I haven't seen addressed in your Dollar Stretcher column.


    I am retiring this year from teaching in Texas. Since I started work before a certain year, I am entitled to take up to 3 years payment as a partial lump sum payment.


    Each year however, lowers my monthly retirement by about $300. The lump sum payment is roughly $48000.


    So if I take NO partial payment, my retirement per month will be about $4000 pre-tax. If I take 1 year partial payment, I will get $48000 as a lump sum (pre tax) & $3700 per month retirement.


    Would it be more beneficial to me to take 1,2,or 3 years as a lump sum, invest the money, & deal with the tax hit?


    Really good question. And one that no one can answer with any certainty. Because there are too many variables that no one knows. First, how long will you be collecting retirement (in other words, how long will you live). You can make an educated guess but there's no guarantee. You also can't know how much the lump sum would earn for you if invested. Or how inflation could affect what your pension payments will buy years into the future.


    You really should talk with a good fee only financial planner. They'll be able to run some projections to give you a feel which answer is most likely to give you the best result. We do have an article on how to find an honest, competant financial advisor .


    Sorry that I couldn't give you a simple yes or no answer, but I didn't want to lead you astray.


    Hope you enjoy your retirement!


1 comment
  • BriA
    BriA Debbie: I am in Texas and I think I can help you with examples of people I have met. I met several AT&T retirees who took a lump sum of their entire annuity and invested it in the market which tanked about 18 months later. At first it went way up, then...  more
    May 7, 2017

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