I am being offered a $40,000 cash out of my retirement benefits from a former employer. If I live to reach the age of 90 that would be only about half of what my benefit would be if I just wait. Would it be better to wait or cash out and invest. The benefit is only about $300 a month if I wait. Thanks!

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USAA believes that most retirees should have guaranteed income (Pension, Social Security, Government Securities, CD’s, or income annuity) that covers at least their essential living expenses (food, housing, health care, transportation), and possibly more. When deciding between taking a lump sum versus a pension/ income annuity option, consider the following:


Health and longevity - if you are in poor health, you don’t expect to live long, and you will not have a surviving spouse who will need lifetime income, then a lump sum may be appropriate. If you expect you or your spouse to live longer than expected, a pension may be a better option.


Access to other retirement assets or resources - if you already have a substantial nest egg or other secure source of adequate income, such as a spouse’s pension, then consider a lump sum. Remember that “substantial” is a relative term. It all depends on how much you plan on taking from your nest-egg for retirement income.


Investment risk – it may be difficult for you or your survivor(s) to properly invest and manage a lump sum that is needed for retirement income. Also, the monthly pension amount paid from the employer, may be hard to match with an outside provider.


Look before you leap – Since this is usually an irrevocable decision, carefully review the following:


Consider your sources for guaranteed income and expenses during retirement. Don’t be tempted to take a lump sum for non-retirement purposes, such as paying off debt, paying for everyday expenses, or helping family or friends.