lump sum

Large payment of money received at one time instead of in periodic payments. People retiring from or leaving a company may receive a lump-sum distribution of the value of their pension, salary reduction or profit-sharing plan. (Special tax rules apply to such lump-sum distributions unless the money is rolled into an IRA rollover account.) Some annuities, called single premium deferred annuities (SPDAs) require one upfront lump sum which is invested. Beneficiaries of life insurance policies may receive a death benefit in a lump sum. A consumer making a large purchase such as a car or boat may decide to pay in one lump sum instead of financing the purchase over time.

A lump sum is a one-time payment of money, as opposed to a series of payments made over time.

See also

• Lump sum tax

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