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Should I Take My Pension In Payments Or As Lump Sum?

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Should I Take My Pension In Payments Or As Lump Sum?
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50 Comments

    Popular Comments:

Bri A . 2020-02-04
I met people at the IRS doing seasonal work who had been at AT&T, and offered an early buyout for retirement, who took a lump sum for their pension, and invested it, just in time to see their investments drop to 50% value in 2008-2009. Those who took the monthly annuity were fine. These workers, had to take new jobs to survive. The pension depends on the company or government agency's stability over time, and no one can say for sure.
121 2 . Reply
Rusty Sparks . 2020-01-20
Haters gona hate....
121 2 . Reply
Ty Spiller . 2019-12-14
62 and still young?....
121 2 . Reply
2558jmb . 2019-11-03
My Husband has a NY State Pension that he will get, he has several ways to choose his payments but no Lump Sum is allowed but if he dies before me i will get the same amt . he was getting for the rest of my life.
121 2 . Reply
J Yang . 2019-10-26
Pensions are under funded. Scary times ahead for those counting on it
121 2 . Reply
christopher hennessey . 2019-10-22
I have a monthly pension,glad to have it.
121 2 . Reply
Alex Richani . 2019-10-22
Did we miss something? “Your heirs get $147k or get nothing” is perhaps the worst rationalization of whether to take a pension or lump sum payout. Is she living off her retirement account? If so, that $147k maybe not only be a lower balance, but it may be gone!

Dave comes across as such a conservative guy with his philosophy of paying debt first to manage the risk of being leveraged, but he totally dismisses longevity risk.
121 2 . Reply
L D . 2019-10-18
We are no longer in a 10-12% world, especially given the risk free rate is 2%. If you could get 6% risk free, then maybe.
121 2 . Reply
Tom C. Clark Chemistry . 2019-10-18
There are some financial questions that are simply not answerable because we cannot predict the future. What if she is from a long line of long-living people and opts for the annuity? The next day she gets hit by a bus before she has a chance to collect her first monthly payment? On the other hand, let's say she opts for the lump sum and her husband takes it to Las Vegas and loses it at the roulette table and she lives for another thirty years? Both options carry their own risks.
121 2 . Reply
Chris Ev . 2019-10-15
Dave...10-12% world? Not over the long haul.
Be realistic.
No one would plunk their entire nest egg in a high risk investment.
Bad advice.
121 2 . Reply
God Almighty . 2019-10-11
Always take it as a lump sum.

As you can put it into the bank, an gain interest on it, I remember my Dad set up a savings account, an he would use his pension (which he had as a lump sum) to pay into the savings account, an he made thousands per year (literally thousands), he probably made about 2 or 3 thousand per year just by constantly paying into saving accounts, an that's not including the amount he made through investments.

P.S. He personally invested into me and my bothers Gym (quite a small gym), an he owns 20% of what it makes, an none of this could have been done without the lump sum.
121 2 . Reply
Kevin R . 2019-10-07
Always take the lump sum of you're financially savvy. Also something to consider is if the pension system blows, then the rest is forfeit. So there is still risk in taking payments versus lump sum.
121 2 . Reply
Stephen Dolan . 2019-10-05
I would consider taking the guaranteed return rather than the potentially higher returns which may end up being negative.
121 2 . Reply
John Minogue . 2019-10-04
Whoa!!! That was not good advice. All pensions are NOT the same. The employer offered $147K lump sum. The next question should have been, “How much is the defined benefit? Then compare the two to see which one is the better deal. I live on a pension and I can tell you in my pension system it is NEVER a good idea to take a lump sum. NEVER. EVER. No scenario that makes sense. Not a single one. I know for a fact if I crunched the numbers with Dave he would be forced to agree. His mistake was assuming all pensions are the same.
121 2 . Reply
Dave billups . 2019-10-02
No mention of the tax on the lump sum. Consider that and the decision is my th a simple.
121 2 . Reply
Gabriela Ariza . 2019-10-01
One more thing to keep in mind is you never know if the company will go bankrupt. Look at Sears. It is best to take the lump sum instead of worrying about getting payment later on in life.
121 2 . Reply
Arvind Talukdar . 2019-10-01
But is the lump sum taxed? Cause if it is, then taking it at fixed payments might be more cost effective.
121 2 . Reply
Metal Bum . 2019-09-30
Real estate is the top most impressive returns with little risk.
121 2 . Reply
Raj Beekie . 2019-09-30
Dave has got to be smoking something special. 97% of investors do not make 10-12% a year. He is setting this lady up the lady with regard to unrealistic returns.
121 2 . Reply
PT _ . 2019-09-30
I would rather have the income stream, once that $147,000 is gone then what.
121 2 . Reply
Dan McCarthy . 2019-09-29
IRS 417e rates are very low right now. Lower rates = higher lump sums. Go with the lump sum.
121 2 . Reply
M Detlef . 2019-09-29
Pensions are NOT for your heirs!!!!!
121 2 . Reply
InsideOutside UpsideDown . 2019-09-29
I have a public employee retirement that i am forced to contribute 6% of my salary i to. When i am able, i can lump sum only half of what is in there. Sucks.
121 2 . Reply
Red Pill . 2019-09-29
Pension, IRA's and 401K's are at risk in this next Financial Crisis...... Ramsey needs to get educated on that FACTS that the Government has the right to take your money!!!!!!!!!!!!!!!!!!
121 2 . Reply
Paul Sin . 2019-09-28
Clear illustration he isnt a licensed professional. He didnt ask the pension payment, what if the women would have received 50k per year for the rest of his life. He also just uses the terms " mutual funds " there are thousands. His information is made for the ignorant and irresponsible.
121 2 . Reply
One Day You May . 2019-09-25
She just needs to deliver some Pizza and it's gonna be alright
121 2 . Reply
Morpheus ! . 2019-09-25
Know thyself. Some people with a "lump sum" are dangerous. If you are an experienced, disciplined investor...take the lump. If not, take the monthly pay.
121 2 . Reply
Robert Bell . 2019-09-24
$150 turns into $300 in the 8 years between 62 and 70??? With no additional funding??? In the stock market??? BWAHAHAHA good luck with that unless you find the next Microsoft or whatever. I dont know what funds guarantee this kind of return but if it was that simple we'd all be down at the yacht club.
121 2 . Reply
kevin kuc . 2019-09-24
Pension always!
121 2 . Reply
ransom182 . 2019-09-23
6-7% is a great return in retirement. Dave is out to lunch on 10-12%. Please get some additional financial advice Lorrie.
121 2 . Reply
Rick Park . 2019-09-23
Each situation is different. Not taking the lump sum has assured income to me and my wife for our lifetimes. There are other assets that will become our children’s inheritance. By the way, my pension is a defined contribution type, so save the “free money” flaming... this is my money saved over several decades of work. The amount I receive versus market returns on a like amount invested in a positively performing market is comparable, and locked in by an exceptionally well funded and managed system. I’m not disparaging Dave’s advice, only interjecting that there are many types of pensions and individual situations, and you should consider all options carefully.
121 2 . Reply
BriefCarBreakdown . 2019-09-22
Old people have it so easy with their pensions 😒
121 2 . Reply
termita358 . 2019-09-22
No no no no...... the purpose of the pension is to guarantee an income for ever. Unless you are a really good investor you should not take the lump sum. It is crazy to do that. This is crazy advise. I mean I'm shock he is advising that. Who gets 12%? If you are retired your portfolio is going to be conservative and you will not get 12%. CRAZY ADVISE!!!!
121 2 . Reply
travis shooks . 2019-09-22
I’m going to agree with Dave to take the lump sum most of the time. I think his logic here contradicts another viewpoint he has. A pension has a guaranteed rate of return, the market does not. You can’t really compare that. It’s the same logic Dave uses when comparing paying off debt at 4% v investing in the market at say 7%. One is a guaranteed return from paying off the debt the other is not so they are more difficult to compare. I agree with Dave here but one of his reasons contradicts reasoning he uses for paying off debt.
121 2 . Reply
NurturingTalents . 2019-09-22
6-7% in a 10-12% world. Compare net of fees and inflation...
121 2 . Reply
read500 . 2019-09-22
Im an accountant. He didnt answer her question at the end. She is asking can I take money out of my IRA and use it to buy property? Answer is sure, why even go with IRA in the beginning if youre going to do that? Just use the lump sum to buy a property. Are you dumb?
121 2 . Reply
Aleksey N . 2019-09-22
Dave: "you are 62 and still young".... WHAAAAAA?????
121 2 . Reply
Fall Guy . 2019-09-22
That’s a small pension
121 2 . Reply
EMIL ATIĆ . 2019-09-22
Lump sum then put it all on red
121 2 . Reply
Levi Bond . 2019-09-22
Self directed IRA's are a great way to lose your money.
121 2 . Reply
Investing Education . 2019-09-22
lump sum and then invest it
121 2 . Reply
Daniel Proulx . 2019-09-22
I want to know what the monthly payout on the pension would have been. This may not have been great advice. Dave never asked that question. The payout of $147,000 for a life's work doesn't seem like a deal to me. If having this money to be part of your heir's inheritance is your goal then great. However if you want to use this money to finance your retirement then let's say you use the 6% return as your retirement income and preserve the balance, that only gives you a retirement income of $8800 a year. Giving advice with out all the facts? Shame on you Dave Ramsey!!
121 2 . Reply
Ed Jones . 2019-09-22
Unless you're buying a car or eating mashed potatoes, always take the lump.
121 2 . Reply
Esteban Fuentes . 2019-09-22
Sale the CAR!
121 2 . Reply
Sir We Are About to Die . 2019-09-21
payments. If you take it in a lump sum, there is a chance you are going to blow all of it.
121 2 . Reply
NeoAndersonReloaded . 2019-09-21
Take the money and move to tailand, you will be a king and queen.
121 2 . Reply
Economical Canadian . 2019-09-21
take that lump sum.
121 2 . Reply
c103110a . 2019-09-21
More Math: figure out your crossover age, usually, age 75. This means that you are okay if you die before 75. If you live to 95, you made the wrong decision. Also, pension plans are not guaranteed. A bird in the hand is worth two in the bush. I rolled mine over to a self-directed IRA and haven't even touched it.
121 2 . Reply
Cash Boy . 2019-09-21
LOL imagine telling a 62 year old to put that money into mutual funds right before the 2008 crash. They'd lose half their money. Bonds are simply better because they never crash.
121 2 . Reply
Cash Boy . 2019-09-21
That money should go into bonds not mutual funds. Mutual funds perform well but occasionally crash. Can't afford to lose half that money given your age.
121 2 . Reply