Show me the money: now or later? Issue date: March 28, 1999 In this article: Stock heavy 401(k)s

Pension payouts: If you can stomach some risk, a lump-sum payout can work to your benefit. Moshe Milevsky, of Toronto's York University, compared three scenarios: a pension paid out over time; one taken as a lump sum and invested in low-risk money market accounts; and one taken as a lump sum invested half in stocks, half in lower-risk securities. The results? The lump sum invested half in stocks outperformed the other options. (Note to job changers: When you leave a job, you are often asked to choose whether you want your 401(k) money in a lump sum or rolled into an IRA or your new employer's plan. Choose one of the latter two. The taxes and penalties that come with taking out retirement assets before age 59 can cost 40 percent of the money you've saved.)

Divorce settlements: Look at your total picture, says Paul Westbrook, a Ridgefield, N.J., financial planner. "If your cash flow is comfortable but you haven't saved as much as you'd like for retirement, taking a lump sum and investing it might be the best thing," he says. "If your cash flow is weak but you have a cushion set aside, a cash stream might be better. And if you realize that if you have the money, you'll spend it - the more distance between you and that cash, the better."

Legal or medical settlements; lottery winnings: What are your goals? Consider a $1 million lottery win paid out over time. Typically, you'll get $50,000 a year for 20 years. After federal taxes (at 28 percent), that's just $36,000 a year. It's a new car or college tuition or, if you invest wisely, retirement security. But it's not a
10 percent down payment on a million-dollar house or enough seed money to start many new businesses. If your goals are the latter, opt for a lump sum. You will get the present value at current interest rates, about $548,000. If you opt to take an annuity and then change your mind, you'll have to go to a settlement company to convert the payments, and that can be expensive.

It sounds OK on the surface. One-fourth of participants have more than 80 percent of their assets in equities. That may not be too high a percentage for someone in his 20s or 30s, but it is for older workers.

Another eyebrow-raiser: Among participants whose plans offer loans, nearly 20 percent had taken advantage. The average unpaid debt was 16 percent of their account balance.

Jean Chatzky's column appears every other week. Write to: Jean Chatzky, USA WEEKEND, 1000 Wilson Blvd., Arlington, Va. 22229-0012 (e-mail: finance@usaweekend.com).