This issue differs from the pension max scenario. Here, the employee opts to take a larger monthly pension benefit. In exchange for this larger pension check, however, the spouse gives up any survivor pension, which could cause serious financial problems when the employee is deceased.

If you’re not married or your spouse is entitled to a survivor’s pension, the lump-sum payout may not be the best option for you. For example, if you’re scheduled to receive a fixed income for life from a defined benefit plan, even a modest one, then you can build the rest of your investment portfolio around it. You’ll be able to reduce your risk by diversification. The pension can be used as the conservative element of your investment portfolio. You can then supplement it with riskier, and potentially more lucrative, investments.