Lump-Sum Payment

AAA

DEFINITION of 'Lump-Sum Payment'

A one-time payment for the total or partial value of an asset. A lump-sum payment is usually taken in lieu of recurring payments that would otherwise be received over a period of time. The value of a lump-sum payment is generally less than the sum of all payments that the party would otherwise receive, since the party paying the lump-sum payment is being asked to provide more funds up front than it otherwise would have been required to.

BREAKING DOWN 'Lump-Sum Payment'

Lump-sum payments are often used in structured products that typically provide payouts over a series of times, such as annuities or other retirement vehicles. This type of payment is also used in structured settlements, and in some corporate retirement packages, in which the company will incentivize employees to retire early by providing all retirement funds up front.

RELATED TERMS
  1. Annuity

    A financial product that pays out a fixed stream of payments ...
  2. Lump-Sum Distribution

    A one-time payment for the entire amount due, rather than breaking ...
  3. Distribution

    1. When trading volume is higher than that of the previous day ...
  4. Pension Fund

    A fund established by an employer to facilitate and organize ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's ...
  6. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s ...
Related Articles
  1. Options & Futures

    Selecting The Payout On Your Annuity

    Make sure you understand your options for withdrawing your funds from this complex instrument.
  2. Retirement

    Pension Law Could Reduce Your Payout

    Discover how this act negatively affects your lump-sum withdrawals.
  3. Retirement

    Lump Sum Versus Regular Pension Payments

    If you're about to retire, you may be facing this dilemma soon. Find out what your options are.
  4. Fundamental Analysis

    Explaining the Central Limit Theorem

    Central limit theorem is a fundamental concept in probability theory.
  5. Fundamental Analysis

    Examining Mexico's Trillion-Dollar GDP

    Examining the gross domestic product growth and composition of Mexico, the second largest economy in Latin America
  6. Fundamental Analysis

    What Causes Inflation in the United States

    Inflation is the main catalyst behind U.S monetary policy. But what causes this phenomenon of sustained rising prices? Read on to find out.
  7. Retirement

    Retirement Planning for Entrepreneurs and Small Businesses

    If your business has receiveables, here's a smart way to leverage them to build up your retirement fund fast.
  8. Fundamental Analysis

    Is India the Next Emerging Markets Superstar?

    With a shift towards manufacturing and services, India could be the next emerging market superstar. Here, we provide a detailed breakdown of its GDP.
  9. Retirement

    Best Ways to Save For Retirement Without an IRA or 401(k)

    Learn the most common types of savings vehicles used to accumulate money for retirement outside employer-sponsored 401(k)s or IRA accounts.
  10. Term

    Estimating with Subjective Probability

    Subjective probability is someone’s estimation that an event will occur.
RELATED FAQS
  1. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
  2. How are non-qualified variable annuities taxed?

    Non-qualified variable annuities are tax-deferred investment vehicles with a unique tax structure. After-tax money is deposited ... Read Full Answer >>
  3. Can a variable annuity be rolled into an IRA?

    You can roll qualified variable annuities, such as other qualified retirement plan accounts, into a traditional IRA. Non-qualified ... Read Full Answer >>
  4. Are variable annuities subject to required minimum distribution (RMD)?

    Variable annuities are insurance contracts that provide tax-deferred growth of assets that can later generate a guaranteed ... Read Full Answer >>
  5. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  6. For what types of financial instruments would I want to calculate the present value ...

    Because the present value of an annuity formula relies on a consistent interest rate and identical payments for a set period ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Depreciation

    1. A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both ...
  2. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  3. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  4. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  5. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  6. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!