Pension buyout or monthly check? This decision deserves more than a gut feeling.
If your employer has offered you a pension buyout, you’re facing one of the most consequential and irrevocable financial decisions of your life. Take the lump sum, and you gain flexibility and potential upside — but you take on the responsibility of making it last. Keep the monthly payment, and you gain predictability and a guaranteed income stream — but you give up control and upside.
The right answer is rarely obvious. It depends on your health, your other income, your family situation, your risk tolerance, and your broader financial plan. At Scarborough, we’ve completed hundreds of pension analyses over 35+ years and know exactly what factors matter.
WHAT WE ANALYZE
Present value of the lump sum vs. lifetime value of monthly payments
Your health, family history, and life expectancy considerations
Spousal and survivor benefit options
How the lump sum could be invested and what return it would need to match the pension
Tax implications of each option
Impact on Social Security and other income sources
Legacy and estate planning goals
FREQUENTLY ASKED QUESTIONS ABOUT PENSION ANALYSIS
There is no universal answer. Generally, the lump sum may be more advantageous if you are in good health, want flexibility and legacy options, or have strong investment discipline. The monthly payment may be more advantageous if you are risk-averse, have health concerns, or value the guaranteed, predictable income regardless of market conditions.
The breakeven point is the age at which the cumulative monthly payments would have equaled what you could have earned by investing the lump sum. This calculation depends on the assumed investment return and varies by individual. We calculate this specifically for your situation.
Yes — and in most cases, this is the most common and tax-efficient approach. A direct rollover of the lump sum into a Traditional IRA preserves the tax-deferred status of the funds and allows us to manage the assets as part of your broader wealth management portfolio.
Pension buyout deadlines are typically 60–90 days, and companies generally do not extend them. Contact us as soon as you receive the offer so we have adequate time to complete a thorough analysis.
WHAT TO KNOW BEFORE YOU INVEST
HOW TO BECOME A 401(K) MILLIONAIRE
WHAT IS A PENSION BUYOUT?
Get a second opinion before you decide.
This is a one-time, irrevocable decision. Schedule a free consultation and let us build the analysis you need to decide with confidence.
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