Lump Sum vs. Annuity: The Great Debate
There is no single "right" answer, as the best choice depends on your health, your investment skills, and your need for guaranteed income.
Key Factors
- Discount Rate: This represents the return you think you could earn if you took the lump sum and invested it yourself.
- Longevity Risk: A monthly payout lasts as long as you do, protecting you if you live much longer than average.
- Inflation: Unless your pension has a Cost of Living Adjustment (COLA), the purchasing power of your monthly check will decrease over time.