Pension Benefit Elections

Helping You Make One of the Most Important Retirement Decisions

For retirees fortunate enough to have a pension, one of the most critical choices they must make before retiring is how to receive that benefit. Pension decisions are typically one-time, irreversible elections—meaning you often cannot change your choice after retirement begins. Because of this, it’s essential to evaluate every option carefully and understand the long-term financial, tax, survivor, and risk implications.

At Greenbush Financial Group, we help clients navigate these choices with a structured, comprehensive analysis so they feel confident in selecting the pension option that best aligns with their goals, financial needs, and family considerations.

Understanding the Core Pension Options

When retiring, most pension plans require participants to choose between multiple payout structures. The most common options include:

1. Single Life (Straight Life) Option

This benefit provides the highest monthly payment but continues only for the retiree’s lifetime.
Once the retiree passes, payments stop—no survivor benefits.

2. Joint and Survivor Options

These options provide a reduced monthly pension during the retiree’s life but continue payments to a surviving spouse at a chosen percentage:

  • 50% Survivor Benefit

  • 75% Survivor Benefit

  • 100% Survivor Benefit

The higher the survivor percentage, the lower the retiree’s monthly pension. However, these options help ensure income continues if the non-working or lower-earning spouse lives longer.

3. Pop-Up Options

Some pension plans offer a “pop-up” feature:
If the retiree selects a survivor option but their spouse predeceases them, the pension “pops up” to a higher benefit—often close to the single-life amount.

These choices create meaningful differences in long-term cash flow, risk, and income stability.

Lump Sum vs. Monthly Pension Payments

Another major decision retirees often face is whether to:

  • Take monthly pension payments for life, or

  • Elect a lump sum payout that can be rolled into an IRA

This analysis varies significantly from person to person and from plan to plan.

When evaluating the lump sum option, we consider:

Rate of Return Needed to Replicate the Pension

We calculate how much you would need to earn on the lump sum to match the pension’s lifetime monthly payments. This helps determine whether a pension or rollover is financially more advantageous.

Tax Flexibility

A pension creates immediate taxable income, whereas rolling the lump sum into an IRA allows you to control when taxes are realized through strategic withdrawals.

This can benefit retirees who want:

  • Larger withdrawals early in retirement

  • Lower withdrawals in later years

  • Opportunities for Roth conversions

  • Control over Medicare IRMAA thresholds

  • More flexibility for legacy planning

Flexibility vs. Guarantees

Choosing between a pension and a lump sum is also a risk tolerance decision:

  • Pension payments provide guaranteed income for life—ideal for risk-averse retirees.

  • A lump sum rollover offers investment control and the potential for higher returns, but with market risk.

We help clients determine which approach aligns with their comfort level and long-term goals.

Solvency & Pension Safety Considerations

Although many pension plans are financially sound, some employers face instability, bankruptcy, or insolvency. In such situations, pension plans may be taken over by the Pension Benefit Guaranty Corporation (PBGC), which may result in reduced benefits depending on plan limits.

We help clients to evaluate:

  • The financial health of the pension plan

  • PBGC coverage limits

  • Potential downside risks to long-term payments

This helps clients understand whether they should lean toward guaranteed payments or the lump sum option.

How We Help Clients Make the Right Pension Decision

At Greenbush Financial Group, we provide:

  • Customized analysis comparing all pension payout options

  • Lump sum vs. pension modeling based on returns, risk, taxes, and life expectancy

  • Survivor benefit scenario planning

  • Tax-efficient withdrawal strategies

  • Social Security coordination

  • Legacy and estate planning analysis

  • Stress-testing for inflation, longevity, and market conditions

Our goal is to ensure clients fully understand their choices before making this critical, one-time decision.

Next Step

If you are approaching retirement, now is the time to analyze your pension options and understand the long-term financial implications of each decision.

A thoughtful pension decision today can protect you and your family for decades to come.

Schedule a Consult Call
 

Our Pension Blog Articles

“Needed some clarification about pension benefits, emailed Michael overnight and got a quick response the next morning. Normally, this doesn’t happen. I highly recommend Greenbush Financial Group. ⭐⭐⭐⭐⭐”
— Ty Miller

This endorsement provided for Greenbush Financial Group, LLC on Google Review was made by a non-client, and it was a non-paid review.  This non-client was solicited by Greenbush Financial Group, LLC to provide the endorsement. 

“Mike has been a great source of information and guidance for my family’s financial future. I always feel smarter after speaking with him. ⭐⭐⭐⭐⭐”
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“Rob and Brad were very knowledgeable about financial management for my husband and I. They were also very courteous and dedicated their time to helping us. We truly appreciate the assistance.⭐⭐⭐⭐⭐”
— Kellie Helm

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— Dennis DeLisle

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— Richbabegang

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“Thanks for explaining this to me in terms and scenarios I can comprehend. I need to decide what route I need to go.”
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Frequently Asked Questions: Pension Benefit Options

  1. What is the difference between a single-life pension and a joint-and-survivor pension?
    A single-life pension pays the highest monthly benefit but stops at the retiree’s death. Joint-and-survivor options pay a reduced benefit but continue payments to a spouse after the retiree passes.
  2. How do I know if I should take a survivor benefit option?
    This depends on factors such as spouse longevity, income needs, Social Security benefits, and risk tolerance.
  3. Should I take the lump sum or monthly payments?
    The right answer depends on your goals, risk tolerance, taxes, and how much you would need to earn on the lump sum to replicate the pension.
  4. Are lump sum rollovers taxable?
    A direct rollover to an IRA avoids immediate taxation and allows you to control when withdrawals—and taxes—occur.
  5. What is a pop-up pension option?
    A pop-up option allows the pension to increase if your spouse dies before you, mitigating the reduced payment that comes with choosing a survivor option. Not all pensions offer a pop-up election.
  6. How do interest rates affect my lump sum value?
    Higher interest rates typically reduce the lump sum value, while lower rates increase it. Timing can significantly impact your lump sum calculation.
  7. What if my employer goes bankrupt—will I lose my pension?
    In many cases, the PBGC steps in to insure a portion of the pension. We analyze plan solvency and PBGC limits to assess this risk.
  8. Can my pension decision be changed after I retire?
    In most cases, no. Pension elections are usually permanent, which is why it’s essential to evaluate all options carefully before retiring.
 

Contact Us . . . .

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All of our services start with a complimentary consult. No high pressure sales tactics. We are financial planners, not salesmen. Schedule Yours Today.

About Our Firm:  Greenbush Financial Group is an independent registered investment advisory firm based in Albany, New York, that provides four main services to clients: fee-based financial planning services, investment management, employer-sponsored retirement plans, and retirement planning services.  The firm serves clients locally in the Albany region and virtually across the United States.

 
 

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