Consider these other issues before taking the lump sum.
Insure against longevity
If members of your family live a long time -- to age 90 or even 100 -- taking the lump sum gives you more flexibility and the power to invest aggressively to make your money last longer. "You have every investment in the world available to you and you can allocate the money any way you want," says Louis Scatigna, a Certified Financial Planner from Howell, N.J.
The flip side, of course, is that an aggressive strategy is risky, so you risk loss of principal in an uncertain market environment, and it can take many years for your portfolio to rebound. If you pay someone else to manage your money, there's still no guarantee you'll make money every year. And you pay substantially for the service. A 1.5 percent asset-based fee siphons $7,125 annually from a $475,000 lump sum.
Of course, you don't have to touch your investments if you don't want to. As long as you have other resources, you can let the money sit during years when there are losses or returns are very low.
You'll owe federal income taxes on every monthly pension payment. But with a lump sum, you don't have to pay the tax man if you don't need the money. If you roll the lump sum into an IRA, you'll only be taxed on the money that you choose to take out each month. Beginning at age 70½, the IRS insists that you withdraw a certain amount and pay taxes on it, but because minimum required distributions are low, the tax owed would likely be less than with a monthly pension.