My job is offering me a payout. Should I take a $61,000 lump sum or $355 a month for life?
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“My S&P 500 investments have roughly doubled every seven years.”
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June 27, 2025
11:01 AM
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Advanced ➔ Results The MoneyistMy job is offering me a payout
Should I take a $61,000 lump sum or $355 a month for life. ‘My S&P 500 investments have roughly doubled every seven years’Last d: June 27, 2025 at 7:01 a
ETFirst Published: June 23, 2025 at 8:19 a
ETResizeListen(7 min)“My current net worth (assets minus liabilities) is $350,000. ” (Photo subject is a model. ) Photo: Getty Images/iStock Dear Quentin,When I leave my job, would I be better off taking a $61,000 lump sum to roll over into an existing IRA or, instead, take $355 a month for life
I’m 49 and have no debt except for a mortgage with $56,000, and I’m currently working full-time and receiving a $2,400-per-month military pension
My current net worth (assets minus liabilities) is $350,000
My S&P 500 investments have roughly doubled every seven years
Planning AheadRelated: I’m 51, earn $129K and have $165K in my 401(k)
Can I afford to retire when my husband, 59, draws Social Security at 62
You have done the one thing that millions of Americans dream of doing by reducing your debt so it will be effectively nonexistent by the time you retire
Photo: MarketWatch illustrationDear Planning,Your letter is a tein ball: tightly packed with healthy news
The good news is that you’re not living from paycheck to paycheck, nor will you be in retirement, so this money, whether it comes in a lump sum or a monthly payment at the end of your tenure at your workplace, won’t make you or break you
You have done the one thing that millions of Americans dream of doing by reducing your debt so it will be effectively nonexistent by the time you retire
Your savings, pension and nearly paid-off will give you a lot of financial freedom in your 60s and beyond
For some people, $355 a month would mean the ability to put food on the table
For others, it’s merely the cost of a high-end gym in Manhattan
Put more bluntly, one person’s full stomach is another person’s toned abs
Given your savings and $2,400-per-month military pension, you bably belong to the latter category
I’m assuming that if you opted for the monthly payments, you’d start getting them at age 65
If you were looking at a retirement where you needed every last penny and you were unwilling to take any risk, you would bably choose this option
But given your solid financial situation and risk tolerance, you would bably be better off taking the lump sum and it in the stock market
Converting your IRA to a Roth IRA comes with long-term tax benefits, but in the moment, it can actually generate a high tax bill
Here are the pitfalls to avoid
The toll of inflationFor your $61,000 to double in seven years, you would need to generate returns of 10% on your investment
That is the average annual return for the S&P 500 over 30 years
If you took that lump sum at age 65, you’d have roughly $122,000 at 72 and $244,000 at 79
If you left the company and got a lump sum now, at age 49, and you did achieve 10% returns, you’d be looking at similar rates of return in seven and 14 years’ time
If you instead decided to take the $355 monthly payment, it would take more than 14 years for the monthly payments to reach $61,000, excluding interest
And of course, that payment would remain the same while inflation causes the cost of living to rise
So you’re really better off taking the lump sum when you leave the company and it, whether you do it now or at age 65
It’s a case of the tortoise (compounding) beating the hare (monthly income)
There are, of course, no guarantees
The market tends to go up over time, but it is unpredictable, as we have seen over the last 50 years
The S&P 500 SPX fell 18% in 2022, gained 26% in 2023 and rose another 25% in 2024
It took more than five years for the market to recover from the 2008 financial crisis, which was caused in part by predatory and subprime lending in the mortgage market and lax financial regulation. are unpredictableIn recent years, we’ve had a worldwide pandemic that sent stocks tumbling (although they returned to prepandemic levels 10 months later), a new administration that has cut a swath through the prior administration’s policies in under six months, charted a different course from all previous Republican and Democratic governments in modern times with its stance toward the postwar Western alliance, and introduced sweeping tariffs
The socioeconomic outlook is uncertain
Others would call it volatile
Investors are waiting to see what action, if any, Iran takes after the U
Bombed that country’s nu sites over the weekend
There is a war in Ukraine and increasing instability in the Middle East, and economists continue to debate the effect of President Donald Trump’s tariffs on U
Prices and the broader economy
You’d have less ability to access your $61,000 if you rolled it into your IRA, but you can afford to let your money grow over time while resisting the temptation to pull your investment out when the going gets rough, as many people contemplated doing during the market turmoil in April
You can also afford to wait to collect your Social Security benefits until you reach the age of 70, thereby maximizing your benefits
You’re looking at a bigger payday than a monthly gym membership
Related: ‘It might be another Apple or Microsoft’: My wife invested $100K in one stock and it exploded 1,500%
You can The Moneyist with any financial and ethical questions at qfottrell@marketwatch
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By ing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch
By submitting your story to Dow Jones & Co. , the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties. the Author Quentin FottrellQuentin Fottrell is MarketWatch's Managing Editor-Advice and The Moneyist columnist
You can him on Twitter @quantanamo
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