NEW YORK (Money) -- My husband is 45 and has worked for the same company for 27 years. He has been given a separation package that requires him to make complicated retirement decisions, the main one being whether he should take his company pension in monthly payments for life or as a lump sum. What should he do? Help!!! - Val, Tonawanda, New York

No doubt about it. You and your husband are facing one of life's tough financial decisions and I can't give you a single "correct" answer.

I can, though, suggest some issues you should think about as you make your decision. And I can suggest a third option that you and your husband may not have considered, but definitely should think about.

First, let's take a look at the pros and cons of the two options you know about.

Income for life At first glance, I suspect that many people like the security of monthly payments for life. After all, that's a simple straightforward solution that's easy to understand. There's also research that shows that retirees who get regular pension payments are happier than those who don't.

But a check for life doesn't provide as much security as you might think. For one thing, very few corporate pensions are adjusted for inflation.

And although you may think of that payment as guaranteed, its arrival actually depends on the financial health of the company that issues it. If your employer runs into financial difficulties down the road a la steel companies and airlines, your payment (and your retirement) could be in jeopardy. A federal agency, the Pension Benefit Guaranty Corporation, does provide a safety net of sorts when employers can meet their pension obligations. But that safety net has limits.

Lump sum By taking the lump sum, on the other hand, you gain control of your money. You can roll it into an IRA and invest it so that its purchasing power keeps up with inflation.

If you need extra cash for some reason - you want to help out the grand kids with college tuition, you need to replace a car or the roof on the old hacienda - you can tap your IRA for the cash.

And, if you manage the money well, you should be able to turn it into a stream of income that will stand up to inflation and last for life. Who knows, there might even be some left over for your no doubt deserving heirs.

Of course, pulling all this off requires some planning and investing ability. So you have to decide if you're up to it, or if you are up to finding an adviser who's up to it.

Fortunately, there's also a third way to go that can give you regular monthly payments and a stash of assets that can provide liquidity and, if managed properly, help maintain your living standard in the face of inflation.

Here's how it works: Your husband takes his pension benefit in a lump sum, rolls it into an IRA and then uses a portion of that IRA to buy an immediate annuity from an insurance company.

Don't confuse this type of annuity with the ones people use as tax-deferred investments. An immediate annuity is a vehicle designed to start paying you a guaranteed income as soon as you invest your money. There are a lot of different payment options, but if you want an income that will pay an income as long as you and your husband are alive, then you want what's called the "joint lifetime income" option, which is also sometimes called the "joint and survivor" option.

(In fact, you can choose to have the payment drop, say, by 25% or 50%, after one of you dies. This way, you get a larger payment while you're both alive and a smaller one when only one of you is still living.)

The advantage to this arrangement is that you get the security of a monthly check, plus you have a stash of money that can keep pace with inflation and help out with occasional unexpected expenses (or fund the occasional indulgence, like a nice cruise).

So which of these three options makes the most sense? That largely depends on you and your needs.

When the income for life makes sense My take, however, is that opting for monthly payments from your employer is a reasonable choice only if you have plenty of other assets you can fall back on throughout retirement - say, a 401(k), IRA or other retirement account with a decent balance. Without such assets, you've only got monthly checks coming in (your pension and Social Security), which can limit your ability to maintain your living standard over the long term and meet unanticipated needs.

When the lump sum makes sense As for opting for the lump sum alone, I think that would makes sense only if you're confident that you can invest that money and manage it so it lasts the rest of your life - which could be a good 30 or more years after you retire. I'm not saying that's not doable - it is - but it can be a bit of a challenge.

In many ways, I think the third route I suggested would make the most sense for most people because it gives you a monthly income, plus a stash of cash for liquidity and long-term growth. Yes, you'll still have to manage that money, but there won't be as much pressure on you because your entire retirement security isn't riding on it. You'll also have income from Social Security and the immediate annuity. So even if you really mess up the investing, you've still got money coming in.

Of course, before you embark on any of these strategies, you'll want to compare what your employer is offering in monthly pension benefits vs. what you would get from a private insurer for the same amount of money.

You can do that by going to a site like ImmediateAnnuities.com.

Often employers offer a larger check than what you would get from an annuity. But, remember, you'll have more flexibility by splitting your money between an immediate annuity and an IRA rollover. And the fate of your monthly checks won't be tied forever to the financial fortunes of your company.

Yes, you are depending on the financial health of the insurer. But you can mitigate that risk two ways: first, by choosing a company with high financial strength ratings (which you'll also find at ImmediateAnnuities.com); and, second, by divvying up however much you plan to put into an annuity between two insurers.

I realize that this is a lot to think about and digest. If you're not comfortable dealing this issue on your own, you might want to consider running it by a financial adviser who can sift through the details of the package your husband got from his employer, evaluate your overall financial situation and then help you and your husband make an informed decision. (Get help in choosing an adviser.

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