Learn something new every day
More Info... by email
An important part of choosing the best pension option is carefully reviewing all of the choices. In many cases, people can choose between lump sum or monthly payments, for example. When you are faced with a number of choices, you might feel tempted to select one of the first options that sounds desirable; this is usually a bad idea, however. By doing so, you might miss the chance to make a selection that truly meets your needs. Your unique beneficiary situation may influence your choice, for example. Ultimately, you'll be best served by reviewing and comparing all of the options before you make a choice.
In most situations, you'll have the choice of receiving your pension monthly or as a lump sum. A lump sum payment might be a good option if you want to have access to large amounts of money at all times and do not mind making investment and management decisions. A monthly pension payment plan, however, may prove a better option if you prefer not to have responsibility for managing your investments and like the idea of having a fixed income on which you can count each month.
You can also consider your beneficiary when you are trying to choose the best pension plan option. The percentage of the maximum pension allowance you choose is directly related to the pension benefit you can leave behind for a surviving spouse or other beneficiary. For example, some plans offer a fixed monthly benefit and the chance to leave your beneficiary 100 percent of your monthly payment for the rest of his life. Alternatively, you can choose to receive a little more money in your pension payments during your lifetime after retirement and then leave your beneficiary payments that amount to 75 percent of the maximum benefit amount for the rest of his life. If you opt to receive even more of your maximum retirement allowance each month, you could then choose to leave your beneficiary 50 percent of your retirement income after your death.
If you do not have a spouse or other beneficiary for whom it is important to plan for expenses after your death, you might find a straight- or single-life pension option best. With this type of pension, you can receive the maximum benefit during your lifetime since you won’t have the concern of leaving money behind for a beneficiary. You can, however, consider this pension option even if you do have a beneficiary for whom after-your-death income is important; you might choose this pension option and then use life insurance or another type of investment to meet your beneficiary's needs.