A lot of people like the latter, and prefer to take money over time. That is, if they’re fortunate enough to have such a pension or similar arrangement. I suspect that the idea of getting a lot of money all at once is also scary to some people, and they’d prefer to be on some type of payment schedule instead. You know, kind of like a paycheck system where your life is based on your income.
That’s all great, but do you see any risks here? This may or may not apply to you – it doesn’t actually apply to me – but it’s still fascinating how some of these decisions are made. Personally, I would go for taking money up front instead of a promise to be paid later. There is something about removing future risk, and maintaining control, that seems appealing.
I’ve read enough lately about pensions that are being impacted by change, and retirees potentially losing out on some benefits that they thought they were getting. While much of this might not have been executed just yet, there have been discussions in the news surrounding pensions in Detroit, the state of Illinois, as well as people who have served their country.
Can you imagine being older and in a position of needing money, thinking that you had an solid arrangement in place that you had earned with prior work, only to have the terms of it changed? Meaning, you weren’t getting more than you thought, but will see things get cut in some way, shape, or form. While it seems flat out wrong to me, the reality is that “right or wrong” doesn’t always matter in the real world. Sometimes it is what it is, and we just have to successfully navigate the landscape.
While pensions aren’t exactly common with younger workers, I think there are some lessons we can learn from the whole experience. The big thing, to me, is that there is something to be said about actually having control over money up front. In any situation, whether you’re asking if it’s better to take a lump sum or a pension, or just really any other situation of money now vs. promise later, this should be considered.
You just never know what could happen. Actually, even if you have the money in your possession, anything could happen. There was talk about a tax on bank deposits in Cyprus within the past year, so clearly there are reasons money in hand may not be risk-free either. The bigger point is that the more control we have, and the more we can anticipate what might go wrong, the better prepared we can be to protect our hard-earned assets. And, better yet, be in position to grow and prosper!
My Questions for You
Would you be naturally inclined to take a lump sum instead of a pension, or would you go for the opposite?
Are you risk-averse like me when it comes to future promises to be paid, or are you less concerned about promises being compromised or simply not kept?