Grief is hard enough. But when big financial choices follow, the pressure can feel overwhelming.
That’s what happened to one widow navigating the financial aftermath of her husband’s sudden passing. She was presented with two options: begin receiving his pension at $495 a month, or take a lump-sum distribution of $89,000.¹
While every situation is unique, these decisions often raise the same question: what makes sense for your circumstances?
Here’s a neutral look at each option to support informed decision-making.
Option 1: Taking the Lump Sum
Considerations:
- Immediate access. A lump sum provides full access to the funds right away, which could be used to address immediate needs or longer-term planning.
- Potential for growth. If the money is invested prudently, it may grow over time. For example, assuming a consistent 6% annual return (which is not guaranteed), $89,000 could grow significantly over 15 years. However, returns can vary widely depending on market conditions.
- Estate planning flexibility. A lump sum may allow for more control over how any remaining assets are distributed later.
Risks:
- No guaranteed income stream. Unlike a pension, a lump sum doesn’t provide predictable monthly payments and is subject to market fluctuations.
- Spending risks. Without a long-term strategy, there’s a possibility of depleting funds more quickly than anticipated.
- Tax impact. Depending on the distribution method, a lump-sum payment may be taxable. A tax professional can provide guidance based on your situation.
Option 2: Receiving Monthly Payments
Considerations:
- Predictable income. Monthly payments offer stability, which may help with budgeting or covering regular expenses.
- Longevity support. If you live a long time, cumulative payments may exceed the lump sum.
- Structure. Regular income may encourage disciplined spending.
Limitations:
- Inflexibility. Monthly payouts generally cannot be accelerated for large or unexpected expenses.
- Break-even period. It may take many years of payments to match or exceed the lump sum total, and actual outcomes depend on lifespan.
- Limited benefit for heirs. Monthly benefits may not transfer to beneficiaries unless a survivor option was selected.
So, What’s the Right Choice?
There’s no universally “correct” option. The better fit depends on several personal factors, including:
- Financial needs and obligations
- Health and life expectancy
- Risk tolerance and comfort with managing assets
- Preference for flexibility vs. steady income
- Estate planning goals
Discussing your options with a financial professional can help bring clarity. They can run projections and walk through scenarios — not to tell you what to do, but to help you make an informed choice that reflects your situation.
Exploring Your Options:
Whether you consider a monthly pension or a lump-sum payout, the goal is to align your decision with your personal needs, lifestyle, and long-term financial goals. There is no one-size-fits-all solution — only what feels appropriate and sustainable for you.
Want to talk through your options?
Consider scheduling a complimentary conversation with us to explore how each path may align with your broader financial picture.
Source:
(1) Marowits, Ross. “My Husband Died Unexpectedly before We Got the Chance to Enjoy Retired Life — Now, I’m Being Told I Can Start Claiming His Pension at $495/Month or get a Lump Sum of $89,000. What Do I Do?” Moneywise, 11 June 2025, https://moneywise.com/managing-money/retirement-planning/my-husband-died-unexpectedly-before-we-got-the-chance-to-enjoy-retired-life
This material is for informational purposes only and should not be construed as personalized investment, legal, or tax advice. All investments carry risk, including loss of principal. Past performance does not guarantee future results. Consult your own qualified professionals before making financial decisions.
