If you have other sources of income, take the lump sum. You can roll it into a tax-deferred IRA and let it accumulate for your older age, giving you some protection against inflation.

If you have enough money not to need an additional income stream, take the lump sum, roll it into an IRA and leave it for your children.

If you’re in very poor health and don’t expect to live very long, take the lump sum. You can use it for larger payments if they become necessary because it won’t have to cover a full life expectancy.

One more thing – be sure to check the size of your pension if it’s integrated with Social Security. This means that it’s partly reduced by the size of your Social Security benefit. When making that reduction, companies estimate what your Social Security benefit will be. If they estimate too high, you’ll end up being paid too little on your pension.

In Part 2 we’ll look at the choices available with defined contribution plans.