If you’re evaluating pension options, consider yourself fortunate. Pensions are becoming a rarity in today’s workforce, with most companies having moved away from them years ago. For those lucky enough to have one, the value of that pension — financially and strategically — can be substantial.
But here’s the key: this is not a decision to make on your own or in a silo. It’s easy to view a pension as a standalone choice — select the monthly payout or take the lump sum — but that’s only part of the picture. You need to evaluate the full-farm operation, not just one corner of the field. Your pension has to work in harmony with your Social Security, retirement accounts, and family considerations.
People often focus on just the numbers, but what’s at stake is far more than a dollar amount. It’s your future income, your flexibility, and your spouse’s long-term financial security. That’s why every piece of the puzzle matters.
When considering your options, you’ll typically encounter a few standard choices:
- Single-life annuity. This provides the highest monthly payout, but payments stop when you pass away.
- Joint-and-survivor annuity. This option gives you a reduced monthly income but continues to pay your spouse after your death.
- Lump-sum payout. This gives you the full value of your pension upfront, offering maximum flexibility and maximum responsibility.
Choosing among these options requires more than just preference. It requires context. Are you married? Will your spouse need a continuing income? Are you comfortable managing a large sum of money over your remaining life expectancy? Will that money be needed to support other parts of your retirement plan?
One of the most important steps you can take is to consult a fiduciary. A fiduciary has a legal obligation to act in your best interest, not to sell you a financial product or steer you toward one solution. The fiduciary’s role is to assess how your pension decision fits into your broader goals — not in isolation, but in coordination with every other part of your financial life.
It’s also important to understand that this decision may tie into other income elements, like Social Security. The combination of your pension and Social Security benefits could significantly impact your tax situation, your required minimum distributions, and your retirement income plan as a whole.
And then it’s important to consider the emotional side. For some people, the idea of a guaranteed income stream brings peace of mind. For others, the flexibility and control of a lump sum feels more empowering. But either way, this is a permanent decision in most cases. Once you elect your pension payout, there’s no going back. That makes careful evaluation even more essential.
This isn’t just a numbers game — it’s a personal decision that can affect not only your lifestyle, but your spouse’s future as well. That’s why thoughtful planning, a full-picture perspective, and professional guidance matter so much.
At the end of the day, there’s not a one-size-fits-all answer. The right option is the one that fits your life, your needs, and your long-term goals. Take the time to understand what each choice really means — and make the decision that supports your full financial future.
Financial Enhancement Group is an SEC Registered Investment Advisor.
