# Lump Sum vs Annuity

*Retirement & Benefits — Finicade finance glossary*

The lump sum versus annuity choice asks whether to take a pension as one payment you manage or as guaranteed income for life. Compare them by dividing the annual income by the lump sum to get an implied payout rate, then judge that against a safe withdrawal rate and against your own longevity. The annuity wins on longevity protection and loses on flexibility, inheritance, and the credit risk of the payer.

**Also known as:** pension lump sum, commutation, take the lump sum

**Related terms:** [Annuity](https://finicade.com/glossary/annuity), [Pension (Defined Benefit Plan)](https://finicade.com/glossary/defined-benefit-pension), [Longevity Risk](https://finicade.com/glossary/longevity-risk), [Safe Withdrawal Rate](https://finicade.com/glossary/safe-withdrawal-rate), [Counterparty Risk](https://finicade.com/glossary/counterparty-risk)

Source: https://finicade.com/glossary/lump-sum-vs-annuity