Control Your Retirement Destiny

Chapter 7.5 – “Pensions”

January 17, 2019

In this episode, podcast host and author of “Control Your Retirement Destiny” Dana Anspach covers additional content from Chapter 7 of the 2nd edition of the book on “Pensions.”

If you want to learn even more than what there is time to cover in the podcast series, you can find the book “Control Your Retirement Destiny” on Amazon.

Or, if you are looking for a customized plan for your retirement, visit us at to see how we can help.


Chapter 7.5 – Podcast Script

Hi, this is Dana Anspach. I’m the founder and CEO of Sensible Money, a fee-only financial planning firm. I’m also the author of Control Your Retirement Destiny, a book that covers all the decisions you need to make as you plan for a transition into retirement.

This podcast covers a small part of the material in Chapter 7 on “Pensions.” We realize that, today, not everyone has pensions, but for those of you who do, you have some very important decisions to make.

Let’s take a look at some of those decisions, and the errors you really must avoid.


If you have a pension, count yourself lucky. This is a powerful benefit plan.

There are many decisions that you have to make, and I want to talk about three of them today:

Whether to take your plan as a lump sum or annuity.
What age you should begin your pension.
What survivor option to choose.

Let’s look at the biggest mistakes people make in each of these areas.

First, should you take your pension as a lump sum? Not all pensions offer this choice. Some require you take it out in the form of life-long monthly payments, which is referred to as taking the annuity option. Many pensions also give you the option of a one-time lump sum payment.

Which is best for you?

There is no way to know for sure without doing a mathematical analysis. You calculate what the monthly payments are worth based on your life expectancy and you compare that to the lump sum. In the majority of cases I see, and I’ve seen a lot of them, the monthly payment option is best.

Why does it work that way?

There are a lot of risks you take on when taking the lump sum. What if the portfolio earns less? What if someone cons you out of some of the money? What if you live longer than you expected? The pension plan handles these risks for you and there is a company called the Pension Benefit Guaranty Corporation that insures most pension benefits.

When you take the lump sum, these risks are not covered. Many people take the lump sum, make poor investment choices, and run out of money. If they had taken the annuity choice, they would have had income for life.

What if you meet an investment person that says they can earn you a much higher rate of return if you take the lump sum?

Be skeptical. Be very, very skeptical.

If you are tempted to believe them, go back and listen to Chapter 5, the podcast on “Investing”, and specifically, the section on “The Big Investment Lie”.

Also consider their motives. Do they have a financial incentive to get you to take the lump sum? Hmmmm.

You’ll also need to decide what age to take your pension. If you retire at 55, do you start the pension right away, or wait until age 60 or 65 to take it?

This is another scenario that requires analysis. I’ve seen pensions where there was absolutely no benefit to waiting until a later age. And, I’ve seen pensions where it paid off to wait until age 65 to take benefits and in the meantime withdraw funds from other accounts.

Another key decision you’ll make is what survivor option to choose. If you’re single, it’s likely you’ll choose the life-only option, which means the pension pays out as long as you are alive. You can often combine this with a ten year term certain option. This means if you were to pass before ten years had gone by, the payments would continue to a beneficiary until the full ten year term was reached.

If married, it gets a bit more complicated. You can choose an option that pays 100% of the benefit to your partner when you pass, or 75%, or 50%, or none. The more the pension has to pay out to a survivor, the lower the starting monthly benefit will be.

Sadly enough, I’ve seen spouses who are solely focused on getting the most monthly income, so they choose a life-only pension option. They pass a few years later, leaving their partner with little monthly income. If you’re married, talk through your pension options. Think about your joint life expectancy.

If you each have a pension of about the same amount, then having each of you choose the life-only option could make a lot of sense. But if only one of you has a pension, most of the time you’ll want to make a choices that continue an income for a long-lived partner.

When it comes to pensions, you are making irrevocable decisions. Once the decision is made, you can’t change your mind. In the printed version of Chapter 7 of Control Your Retirement Destiny, I provide several examples of pension decisions, with spreadsheets, and a complete analysis.

I’d encourage you to walk through these examples, or consider hiring expert help before you make a decision on a pension plan.


Thank you for taking the time to listen today. If you like what you heard, go to to get a copy of Control Your Retirement Destiny in either electronic or hard copy format.

You can also visit to see how a staff of expert retirement planners can help.

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