The Biggest difference between yesterday’s retiree’s vs. todays is the diminishing of the Define Benefit – or Pension plans, which has been replaces by Defined Contribution plans. With only 15% of companies (which is decreasing each year) that have Defined Benefit plans today, this will be one of the biggest decisions you have to make before you retire.

The question is: Should you take the Lump –Sum or the Annuity monthly payment? If you are thinking about retiring the following year beware that the lump sum value usually changes between Nov –Dec, during this time-frame the company revalues the lump sum once a year by using the current prevailing interest rates (set by the IRS) to determine what your lump sum is going to be. (Ex: you are offered a $1,500 monthly pension payment; let’s say that’s worth $500,000 as a lump sum in the present year however by the end of the year going into the next year although you will still have the $1,500 monthly payment your lump sum is only worth $350,000). The date in which the lump sum flips is base on your plan document on when the assets are revalued (which can be about 30% drop). You need to go to your employers HR dept and ask for the plan administrator to find out when the switch or drop happens. As interest rates goes up, the value of the lump sum goes down due to  a smaller amount of the lump sum would be needed to produce that $1,500 payment. You want to get a compare analysis done before you make a final decision to make sure you are getting the best deal. A lot of people wait till the following year because they want to get their final company benefits such as bonuses or paid up vacation time before they retire. You should find out how much the Bonus or total benefits amount is (Ex: Bonus of $50,000, can cause you to lose $150,000 of your lump sum). In this case you want to retire before the lump sum value flips. You can search for alterative options such as a immediate annuity/SIPA (single income payment annuity) which could possible get you an extra $1,000 a month ($2,500 instead of $1,500) if you need the money right away or deferred annuity plan which will allow the value of your lump sum to continue to grow. Although employers are moving away from these Define Benefit plan they are not informing their employees about this information.

In conclusion, get serious about your money and find out the rules in your company plan and the options that are available in the free market.