Take a lump sum? It applies to Powerball and pensions

Take a lump sum? It applies to Powerball and pensionsLump sum(Photo: Detroit Free Press)Take the lump sum? Or settle on the slow-but-steady monthly payout?No, we’re not talking about winning a Powerball jackpot or some other winning lottery ticket. We’re talking about what to do if your company or former employer actually has a traditional pension, not just a 401(k) plan, and offers you a lump sum if you give up the chance to receive a monthly pension check.These days, figuring out what to do with your pension can be the real gamble.The Consumer Financial Protection Bureau has released a guide relating to lump-sum payouts as a way to help workers who face the either-or option of the payout or keeping the traditional monthly payment.CFPB Director Richard Cordray noted in a statement that consumers can face a “difficult one-time choice to either take their pension payments in a lump sum or as a lifetime income stream.”The big risk, of course, is will you run out of money?Powerball or pensions, the risk of taking a lump sum remains that you’d take the cash and blow it on big steaks, bubbly and Bugattis, and yes, every other trapping that comes with living the life of the Big Spender.Ric Edelman, chairman and CEO of Edelman Financial Services, a large national financial planning firm with two offices in metro Detroit, said the attraction of taking the lump sum is that you have control over the money. But if you’re a spendthrift and you tend to be irresponsible with money, you could be better off taking the monthly payout or setting up some allowance system, he said.Leon LaBrecque, CEO of LJPR, a fee-only financial adviser in Troy, has advised many Michigan retirees over the years on some lump-sum offers, such as ones made to Ford Motor and General Motors salary retirees a few years ago.Nationwide, several big name companies have offered lump-sum pension payouts to former employees and others, according to the Pension Rights Center.

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