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Should I take a lump-sum payout or monthly payments?

Many cash-balance plans offer a lump-sum payment only, so you may not have a choice.

If you do have a choice, there's no one easy answer.

Monthly payments: If you opt for a monthly payout - known as a life annuity - you are assured of having a permanent steady income. That can be a lot less stressful than taking a big lump sum and assuming responsibility for how to invest the money. With a lump sum, there's also the risk that you'll spend too much today, then be left without enough money to cover your expenses later. By choosing a steady payout, you avoid tearing through your stash.

Lump sum: If you're at all concerned your employer might run into trouble - say, you happen to work in the auto or airline industries - taking the lump sum means you don't have the risk of facing reduced payouts down the line if your employer hits a wall. Even if your company is protected by the Pension Benefit Guarantee Corp., the PBGC does not guarantee it will cover 100% of the money you were told you were entitled to. The PBGC limits its payments to set monthly maximums. (For more, see Will PBGC payouts be as big as I was counting on?)

By taking the lump sum, you also gain control of your money. You can roll it into an IRA and invest it. If you manage it well, you should be able to turn it into a stream of income that will stand up to inflation and last for life. Of course, pulling this off requires some planning and investing ability. So you have to decide if you're up to it, or if you are up to finding an adviser who can handle the job.

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