subject: Is It Smart to Opt For A Lump Sum Pension? [print this page] Is It Smart to Opt For A Lump Sum Pension?
When you think about retirement and pensions it definitely is a time when you ought to be making informed decisions, one of the biggest considerations is whether to choose a lump sum pension. There are a number of possibilities in pension plans but the most common are lump sum pension payments and monthly payment pensions. One of the most important questions that individuals ask is about the financial implications of taking a lump sum pension.
Both forms of pension payments have their advantages and are suited to different individuals in various situations. Pensions can be a very complex subject to understand, therefore it is always advisable to seek expert advice before making any decisions to take a lump sum pension.
Only some pensions will allow you to take a lump sum pension payment, if yours does, remember by accepting a lump sum reduces the money left in your pension fund. A financial advisor can consider the pros and cons for you. Should you have any debts that you need to pay off then the lump sum pension payment option might seem appealing but this reduction is an important factor to take into account.
So when talking to a financial advisor about lump sum pension payment choices you need to consider:
Are you planning to settle existing debts?
Would you like to pay off your mortgage with your lump sum pension payment?
Are you looking to invest the cash elsewhere for even further in the future or to leave to your kids?
Did you want to just place the money into savings?
Should you be considering taking a lump sum the main aspect to consider is:
Will it benefit me and my family in the long run financially?
Typically the most popular reason behind taking a lump sum out of your pension is to pay off the mortgage on the house. Obviously this will mean that you own your house outright and will enable you to leave it to your children. Remember a mortgage provider will usually charge a penalty for early settlement to compensate themselves for their loss in money over time! Although using a pension lump sum to satisfy your mortgage can provide security, it will have it's disadvantages you will:
You are usually penalised financially for drawing a lump sum
Lost money by fully repaying your mortgage too quick
Taking a lump sum pension payment has its downfalls but every case is unique. Seeking expert advice will help you to make an informed decision that is right for you.
