Dear Liz: I was recently and unexpectedly laid off. Money will be tight on Social Security alone. If I take the lump sum of my pension, the amount would be almost enough to pay off my home. Should I do that?
Answer: Pension payments typically continue for life and you can’t lose the money to fraud, bad investments or stock market downturns. If you had plenty of other assets and the pension was small, you might be fine cashing it out. Under the circumstances, though, consider hanging on to this valuable asset.
In general, you should be extremely wary about tying up a large sum in any one investment. That includes paying off a mortgage. You won’t have monthly loan payments anymore but you may have trouble accessing that cash again in an emergency.
Also be cautious about taking Social Security too early. Your benefits will be permanently reduced, which can have a huge effect on your future quality of life. While finding another full-time job can be extremely tough late in life, even a part-time job might be enough to help you delay filing.
You could benefit enormously from individualized financial advice. Consider reaching out to free or low-cost services, such as Advisers Give Back.