Lump Sum Retirement

The temptation to take a lump sum retirement payout has to be huge for some people who are looking at having a check for more than they have ever seen in their entire lives. A trip around the world or at least to Bermuda, purchasing that business always dreamt of or buying a plane and learning how to fly could all be possibilities. For the retiree that has saved and contributed to a pension plan or 401K, the world could certainly appear to be his oyster with such a grand amount at his disposal. But certainly, having spent all a working life putting money aside for the rest of one's life, few people would spend a lump sum retirement in such a poor manner. But...temptation can never really be erased; rather its danger is in how we respond that becomes the flypaper that traps.

It is true that many companies offer a lump sum retirement payout because it is actually a money savings proposition for the company. It saves them administrative costs over a number of years and eliminating monthly payments to the retiree actually generates accounting figures to fatten the company's overall income. So the question really does become whether to take one big payout or perhaps buy an annuity and have monthly checks arriving for the rest of one's life. But the time to make this very important decision is not on the day one is packing up all the personal items in the office and wiping off the "Happy Retirement" chocolate cake from one's chin. If a note from the benefits department comes down saying, "Please come up and see us before you leave today-we have things to talk about," there may be trouble a brewing. Being asked on that day by a benefits administrator who really wants to get out of the office by five, "Okay, how do you want your retirement money set up?" is NOT a good thing.

If a person does receive a lump sum retirement payout, put the money immediately into a money market account. To save money, this should be done through a brokerage firm that offers true discounts. At that time, a person can then truly sit back and take the time needed to make the big decision. This might be a good time to search out a good financial advisor. This person can give sage advice and recommend perhaps several different avenues for income advancement and safety. The Bible has terrific instruction for husbands on how to truly love one's wife with sacrificial love. The example is from Jesus' own life when the scripture reads, "Husbands, love your wives even as Christ also loved the church and gave himself for it." (Ephesians 5:25) More information on finding a financial advisor is below.

There may be a very seamless way for a person who is given a lump sum retirement payout to invest the money in a new business that perhaps has always been a dream. Those holding a 401k, 403b, Keogh, SEP or other retirement plan can roll their money into a self directed IRA allowing them to invest in real estate, mortgage notes, and other property that can be the gateway to a new entrepreneurial project always dreamt of in years past. This opportunity allows taxes to be deferred until a future date and can open doors to buy rental properties, commercial properties and even foreign real estate opportunities. This option gives rise to the retiree perhaps becoming self-sufficient through the creation of a personal business. One should seek out those who are familiar with this kind of plan and glean the needed advice to be successful.

One should be very careful, however, about those who might try to scam a person who has just received a lump sum retirement payout. For many people who haven't saved enough for retirement, they may be prone to falling for the get rich quick schemes of scammers who can squander or even steal hard earned retirement money. Baby Boomers are beginning to retire by the hoards and have almost two trillion dollars in pension fund assets. This amount of money poses a gigantic temptation for very cunning people to try and take advantage of those who may be fearful and skittish about their futures. The most important advice is for those who are about to trust their lump sum retirement payout to someone who claims to be a financial advisor is to really vet that person with plenty of scrutiny. Check credentials, check the Better Business Bureau and call the associations with whom the broker or money manager is associated.

Of course, maybe the reader is only thirty, changing jobs and wanting to know what to do with the lump sum retirement program payout received on the last day of work. Without much hesitation, the person should take the payout and roll it into the new employer's 401k plan. Try to work it out so there is no personal handling of the money at any time. That's sometimes called trustee to trustee transfer and then there is no question about having to pay any taxes at this time. No matter where a person is in life, holding a large check in one's hand can be a heady experience. This stage of life is time for level-headed thinking and prudent action. Remember that the beautiful red sports car that might be so tempting to buy will one day be just a car, and that world cruise just pictures in an album.

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