Think you’re better off with a lump sum over a monthly pension? Think again.

NCR Corp. Lockheed Martin and packaging firm RockTenn are among the growing number of employers who in recent years have hit tens of thousands of their workers and retirees with an enticing offer: to accept lump sum payouts, often well into six figures, in lieu of monthly pension payments.

The lump sum has some appeal, not the least of which is the lottery effect of getting your hands on a wad of money. There is also the reality that many pensions come without cost-of-living increases, which means they lose buying power to inflation every year. Still financial planners are nearly unanimous in saying that the choice, tempting as it may be, should be rejected by most people. Not only do retirees run the real risk of outliving lump sums, but also most of them are ill-equipped to manage investments effectively. So many retirees are more likely than not to blow at least some of the cash.

“While the idea of suddenly having a large sum of money is tempting, this is a decision that you will have to live with for the rest of your life,” notes a fact sheet produced by the Pension Rights Center, a pension advocacy group. “Any retiree who accepts the lump-sum offer will immediately lose the benefits of a lifetime income and will be responsible for taking care of their own investments and making sure the money lasts through retirement.”

Others offer similar warnings. Still, it seems, the lure of a pot of cash is too much for many people to resist. General Motors for example, reported that 30 percent of its retirees traded the security of a monthly check for a one-time windfall when it made an offer to 42,000 former workers in 2012.

In recent years, warnings have gone up about a coming retirement security crisis taking hold as more Americans are handed the daunting responsibility of planning for retirements by saving in 401(k)s and IRAs. Pensions, many say, offer a more secure path. Still a majority of Americans who have the option choose to handle their retirement finances themselves. Have a look at the chart below, which shows the behavior of people between 50 and 75 years old when faced with a choice between a lump sum and a monthly check. The line at the top shows the percentage of people overall who choose annuities. As it turns out, many are pushed into the choice by plan restrictions. But the bottom line shows the share of people who choose annuities if they are also completely free to take their retirement savings as a lump sum:

People who have the option for taking lumps sums often do. But that does not mean it is the wisest course. Generally, the cash option works best for people who do not expect to live long and have no spouse who will need the lifetime income. It also works for those who are financially set for retirement and would enjoy the freedom that comes with a substantial pot of money. The rest of us -- save for the investment sharpies -- are probably best off with that slow but steady monthly check.

Michael A. Fletcher is a national economics correspondent, writing about unemployment, state and municipal debt, the evolving job market and the auto industry.
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