Lump Sum and Pension for Retirement

Q: I am a 64-year-old male and will retire this May. Presently my only bill is my $2000/month house payment which still has 14 years to go. My company is offering me a lump sum package of my pension account of $500,000 or I can take a monthly pension of $2700 with my spouse getting $1300 per month if I decease before she does. 
Is it better to take the lump sum and turn it over to my investment planner or take the monthly pension?I also have about $500,000 divided up between my 401k and a IRA. Since my wife and I plan on traveling once we retire I would like to bring home $6000/month to cover our house, necessities and travel. My social security benefit will be around $2400/month. 

A: I think your question gets into a very significant topic of what you need versus you want and where those sources of income are coming from.  Looking at your pension, it’s about a 6% cashflow to you and a 3% cashflow to your wife if you were to decease. The latter is fairly unimpressive but 6% is a good cash flow from a pension. To take this question into further consideration, some things I would have to find out from you to give you our opinion are:

  1. Family longevity
  2. Is the pension inflation adjusted or stagnant over the life
  3. Risk tolerance as an investor
  4. Long-Term Care planning
  5. When do you plan to draw SSI and how old your wife is
  6. Flexibility of assets vs fixed income

Once we know these things, this will help further determine whether a lump sum or pension makes sense for you.

Retirement Calculator