1. Will you be at risk of running out of money?

• The monthly payment option offers steady lifetime income, which substantially reduces your risk of running out of money later in life. This is especially important if either you or your spouse is in good health or if either of you has a family history of longevity (for example, you have close relatives living into their 80s or older). A lump-sum payout, however, might make sense if you are in critically poor health, or if you and your spouse already have sufficient income to cover your basic living expenses.

2. Are you taking your pension in a lump sum because you’re worried that you may not live long enough to get back what you’ve earned?

• The monthly pension payment still may be a good choice if you are concerned about the retirement security of your spouse or other beneficiaries. Most plans allow you to provide monthly benefits to your spouse or another beneficiary after your death through something called a joint and survivor payout option.
• Where can you find more information about your payout options? Ask your employer for your pension plan administrator contact information. Your plan administrator will provide you with more specific information about your payout options.

3. Will you have the necessary investment skills?

• When you choose a monthly pension payment, your pension plan manages the pension. This means you don’t have to worry about your investment skills and how your skills may change as you get older. In addition, you don’t have to worry about calculating how much you should withdraw regularly to make your money last.
• A monthly pension payment gives you a fixed amount every month over your whole life, so you don’t have to worry about changes in the stock market. In contrast, a lump-sum payout can give you the flexibility of choosing where to invest or save your money, and when and how much to withdraw.

4. Is your money protected?

• Your pension is typically insured by the Pension Benefit Guaranty Corporation (PBGC). In the event your company declares bankruptcy or can’t make its payments, this federal agency guarantees your payments up to a certain amount. Your pension payments are also protected against certain creditor claims. When you take a lump-sum payout, you lose these protections.
• The protections for your lump-sum money will depend on where and how you decide to save or invest it. For example, if you choose to invest your lump sum in the stock market, you could lose some or all of your money to poor investment performance, and could lose certain bankruptcy protections.
• Online resources To find out more about PBGC’s guarantee limits and whether your plan is covered, go to www.pbgc.gov [2] 

5. Should you take a lump sum in order to buy a private annuity?

• If you want an annuity that gives you regular guaranteed monthly income, you’re generally better off staying with the monthly payment option within your pension plan. A similar annuity from a private company will usually cost you more because it charges to cover costs like a commission to the person who sells it to you.

6. Is a combination of payouts possible?

• Only a few plans allow people to take a combination of payouts. You may decide that the value of your pension is too small to do both. Some married couples may choose to take one spouse’s pension as a lump-sum payout and the other spouse’s pension as a monthly payment.

What if you have a 401(k) or similar individual retirement account?

• This guide is for consumers considering a lump-sum payout from a traditional pension plan. If you have a 401(k), IRA or similar individual retirement savings account, your payout options are typically a one-time lump-sum payout or regular withdrawals from your savings. Some 401(k) plans offer an option to convert your savings into a lifetime monthly pension payment. Ask your employer if this option is available to you.