Choosing between a pension lump sum and annuity is one of the most important retirement decisions you'll make. This choice is irreversible and affects your financial security for the rest of your life.

Lump Sum Advantages

• Control: Complete control over investment decisions
• Flexibility: Access to funds for emergencies or opportunities
• Estate Value: Remaining balance passes to heirs
• Inflation Protection: Potential to grow faster than inflation
• Tax Planning: More options for tax-efficient withdrawals

Annuity Advantages

• Guaranteed Income: Fixed payments for life
• No Investment Risk: Employer bears market risk
• Longevity Protection: Cannot outlive the income
• Simplicity: No investment decisions required
• Creditor Protection: Often protected from creditors

Key Considerations

• Health Status: Poor health may favor lump sum
• Other Income: Social Security and other pensions provide base
• Risk Tolerance: Comfort with investment management
• Spouse Needs: Survivor benefit options
• Company Stability: Risk of employer bankruptcy
• Interest Rates: Higher rates increase lump sum value

Hybrid Strategies

• Partial lump sum (if available)
• Annuity for base needs, lump sum for discretionary
• Delay decision to compare offers over time
• Consider purchasing immediate annuity with lump sum
• Ladder fixed income investments to create income stream