Scott and James discuss which pension option they should select, annuity or lump sum?

Listener Question

Hey guys! Thank you so much for the amazing podcast! I have a pension question. I am a teacher, and I am eligible to retire and begin taking my pension payments in July 2023. I have heard some people say to take the lump sum distribution, and create your own pension/annuity, but the math doesn't seem to work out right for me. I will be 51 at that point, and likely moving to a different profession with an income to add to the pension payouts. The amount that I would receive as a lump sum would be approximately $210,000. That represents all of my contributions over the 28 years I have been teaching plus 4% interest per year. It does not include the contributions from my employer, as I am not entitled to take them if I elect for the lump sum. The pension option that I would choose is the reduced amount that would continue for my wife after my death. It is $3408 monthly, which comes to nearly $41,000 per year. There is no way that I could expect to earn that much on the lump sum of $210,000 to make that a logical choice, is there? Am I doing something wrong on the math?

Planning Points Discussed

• Utilizing Time Efficiently
• Capital Appreciation
• Purchasing Power
• Other issues (IRAs, Inflation, Financial Goals, etc.)

Timestamps:

3:54 - Pension Overview

6:37 - How to Determine the Best Choice

9:35 - Inflation Protection

11:46 - Importance of Your Situation

13:51 - Aligning Your Financial Goals 

LET'S CONNECT!

James

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Scott

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