Retirement can be one of the most anticipated phases of your life only if it comes with relaxation and enough funds to help you live a dignified life. For having a good after-retirement time, there are some important decisions that you should take while you're still young. This important decision and investment is Lump Sum Annuity option or so called Pension.

One very important question that arises is: do you wish to receive the entire pension amount at once, when you retire or you would like monthly installments at a fixed interest rate?

Taking the full pension amount immediately can be quite tempting, but in this case you have to plan the management of the money you receive. In case you do not plan, he will be at the risk of losing all the money. Even if you hire somebody else for managing your money, it will not be absolutely free of cost. The better option is not worrying so much about the receiving of money but to set the amount of that will cover your basic needs.

Taking the entire amount of pension may result in risky investments and fateful money management. Thus, by taking the whole amount, you are always at risk. A lot of people prefer the monthly annuity option as it guarantees a set of amount on a monthly basis of for the entire life. The monthly payments do not get infected by the market value, the inflation rate and other happenings around. One major disadvantage that monthly and the option carries along with itself is that with rising inflation be fixed amount that you get may not be enough for future.

By investing on a fixed-rate Annuity option, you are actually blocking the present base interest rate over your monthly payment. Current economic climate have very low interest rates and so getting low interest rate for the entire life of your payments can be a possibility.

With a Lump Sum, you can consider going for an investment for a short-term until the interest rate increases. This scenario will create the possibility of generating some sort of income that will cover your personal expenses.

An annuity payment can lead you to pay taxes for the each monthly installment that you receive. On the other, a lump sum payment can save you from paying any kind of taxes. We also have an option of rolling the lump sum amount into IRA that can save you from monthly taxed payments also.

You only get to pay taxes when you make withdrawals, and even then the taxes that you pay are much lower than that you pay in Annuity option.

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Article Submitted By: briansibet
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