If you’re approaching retirement and have a pension, you’re probably asking yourself: “Should I take it as a monthly income or as a lump sum?”

It’s a question we hear often at Peace of Mind Wealth Management. And while there isn’t a one-size-fits-all answer, understanding the options and how they fit into your overall retirement plan—can help you make a confident decision.

First, What Does a Pension Offer?

Pensions are less common today, but many government employees and those who worked for companies like IBM or GSK may still have one. Over the years, contributions from you and your employer have built up this benefit. When you retire, you typically have two choices:

• Take the pension as an annuity – a steady income stream for life.
• Take the pension as a lump sum – a one-time payout you can roll into an IRA for flexibility and control.

Annuity vs. Lump Sum: What to Know

An annuity gives you predictable income. You can choose a single-life payout (highest amount but no benefit to heirs if you pass away) or add spousal coverage (lower monthly income but protection for your spouse). The trade-off is simple: the more you ask the pension to cover, the less the monthly payout.

A lump sum gives you the entire pension value upfront. While some worry about taxes, you can roll the amount into an IRA to keep it tax-deferred. This option gives you control over how the money is invested and opens the door for strategies like Roth conversions. Of course, with control comes responsibility—you’ll need a plan to manage the money wisely.

A Third Option: External Annuities

There’s also a middle ground. You can move the pension into an external annuity, a vehicle that may provide higher income, better legacy benefits, and even features like long-term care enhancements. This can be an attractive way to keep guaranteed income while preserving more for your heirs.

What Should You Consider Before Deciding?

The right choice depends on your bigger financial picture. Ask yourself:

• Do I already have enough guaranteed income from Social Security or other sources?
• What’s my health history and life expectancy?
• Is leaving a legacy to heirs a priority?
• How comfortable am I with market risk?
• Do I want the flexibility to do tax planning, like Roth conversions?
• Will my spouse rely on this income if something happens to me?

These questions can make a big difference in which option is right for you.

Two Real-Life Examples

We’ve helped clients in both situations:

• One client moved her pension to an external annuity and saw her income increase by 30%. She also gained long-term care protection and kept a lump sum to pass on to her heirs.
• Another client, a strong saver with multiple income sources, chose the lump sum so he could focus on Roth conversions and maximize the legacy for his family.

The common thread? Both decisions were based on their unique needs and goals.

Why an Analysis Is Essential

Choosing how to take your pension is not a decision to make in isolation. It impacts your income, taxes, and legacy for decades to come. That’s why we always start with a personalized analysis—looking at your entire retirement picture before making recommendations.

Thinking About Your Pension Options?

You don’t have to figure it out alone. We’re here to guide you through the decision with clarity and care.

📞 Schedule your complimentary 15-minute call
✉️ Or email us at info@POMwealth.net to get started.

And if you’d like to hear more, listen to the full episode of the Secure Your Retirement podcast where we break this topic down in detail.