Choosing Lump Sum vs. Monthly Pension Without Modeling the Numbers

Deciding between a lump-sum payout and monthly pension is often one of the biggest financial choices in retirement. Yet many choose based on gut feeling—“I want control of the money” or “I want a guaranteed check”—without analyzing the long-term impact.

The Decision Is Irreversible

Once you select a payout option, there’s no switching later. A well-structured review should analyze:

• Cash-flow needs

• Required minimum distributions

• Inflation and COLA assumptions

• Investment risk tolerance

• Life expectancy

• Survivor needs

• Employer plan strength and funding

The Cost of Guessing

A lump sum that seems attractive today might underperform over time if markets disappoint or if withdrawals exceed sustainable rates. Conversely, a monthly pension without inflation protection can lose purchasing power every year.

Run the Models

Sophisticated modeling compares:

• Break-even ages

• Inflation scenarios

• Market risk simulations

• Tax brackets over time

• Survivor income changes

You wouldn’t buy a home without an inspection—don’t accept or reject a pension without the math.