“If the client is in poor health, then it may be advantageous to take the lump sum,” says Michael Menninger, president of Menninger & Associates in Trooper, Pa. If the worker dies, then the pension usually dies with them. But by taking the money as a lump sum, the money is transferrable to their beneficiaries.
One thing most advisors agree upon is that lump sums should never been seen by clients as “mad money” that suddenly lands in their lap.
“The worst thing that can happen is that someone claims the lump sum payment and then squanders it on unnecessary short-term spending,” says Nathan Twining, lead advisor at Financial Plan Inc. in Bellingham, Wash.