Start With Your Current Pension Statement

Pension documents can be difficult to interpret.They may include estimated monthly benefits, retirement dates, survivor elections, payment options, lump-sum information, plan-specific terminology, and other provisions.

Before making a decision, it's important to understand exactly what your plan is offering.

A pension analysis can help you review information such as:

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• Your estimated pension benefit

• Available retirement dates

• Monthly income options

• Survivor benefit elections

• Lump-sum options, if offered

• Early or delayed retirement provisions

• Cost-of-living adjustments, if applicable

• Beneficiary provisions

• Other plan-specific features

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Your actual options will depend on the terms of your employer's pension plan.

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Monthly Pension or Lump Sum?

Some pension plans may give eligible participants the choice between receiving a stream of monthly pension payments and taking a lump-sum distribution. When that choice is available, it can be one of the most significant financial decisions you make at retirement. A monthly pension may provide predictable income according to the terms of the plan, while a lump sum may provide greater control over how the assets are invested and used.

But neither option is automatically better. The decision can depend on factors such as your age, other retirement assets, income needs, health and longevity considerations, spouse or beneficiaries, investment risk tolerance, plan provisions, and broader financial goals. The right question isn't simply, “Which option pays more?”

It's: “Which option makes sense within my complete retirement plan?”

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Your Pension Election May Affect Your Spouse

If you're married, your pension decision may have implications for both you and your spouse.

Depending on your plan, you may be offered different survivor benefit options. A single-life benefit may provide income based on your lifetime, while a joint-and-survivor option may provide some level of continuing income to a surviving spouse after your death. Specific options and payment amounts vary by pension plan.

Choosing between these alternatives requires thinking beyond your first retirement check.

You may want to consider your spouse's other income sources, Social Security benefits, retirement assets, anticipated expenses, longevity, and what their financial situation could look like if you were no longer there.

 

How Does Your Pension Fit With Social Security?

A pension is only one part of your retirement income picture. Your retirement paycheck may eventually include a combination of:

Pension Income + Social Security + 401(k)/IRA Withdrawals + Investments + Savings + Other Income

Looking at these sources together can provide a clearer picture of how much income you may have available and where potential gaps could exist.

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For example, the timing of your pension may need to be considered alongside your Social Security claiming strategy and planned withdrawals from retirement accounts.

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Instead of viewing each income source separately, Taylor Retirement Solutions helps you understand how the pieces may work together.

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You've Earned the Benefit. Now Make an Informed Decision About It.

Pension elections can be difficult to revisit once payments begin, depending on the terms of the plan.

That makes it especially important to understand your options before submitting your final election paperwork.

Larry Taylor, CFP™ brings more than 40 years of financial industry experience to helping individuals and families navigate retirement decisions. Larry can review your current pension information with you, help explain the financial differences between the options available, and evaluate how those choices may fit into the retirement you're planning.

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