Broker Check

Should You Take A Pension Buyout?

If you are looking to retire soon, you want to get the most retirement income as possible from your pension plan(s).

The number of companies offering pension plans continues to shrink, while the number of companies looking to shed their pension liabilities are increasing. The Coronavirus only accelerated the latter trend. Some companies are offering pension buyouts to reduce the expense of running pension plans and ultimately, eliminate their debt obligations to their pension plan participants. The decision to accept a pension buyout should not be taken lightly.

While pension plans are a great vehicle for a steady stream of retirement income, there are some risks associated with pension plans.  The most common concern we hear is “What happens if the company funding my pension goes bankrupt?” If the company providing your retirement income is not on solid footing, the safety and security you think you have in a pension lifetime income may not be there. Choosing to take the pension cash value in a lump-sum distribution is not a choice you should make without the right amount of thought and analysis with your financial advisor.

Do yourself and your financial future a favor, talk with a financial advisor who can walk you through your options. This individual can also help you develop a financial plan that outlines how you are going to fund your retirement. Your retirement plan should make it much easier to see which pension option will bring you the optimal retirement income. 

You may be tempted to put off thinking about this stuff. No one wants to think about getting old, but sadly, it will happen to all of us. At some point, you will have to make decisions regarding your pension income, i.e. lump-sum payout, lifetime income, period certain income, joint life income, and so on. When choosing how to take your pension, crunch the numbers. Your best option may be different than the best choice for your coworker. Things like your health, marital status, assets, other pensions, and guaranteed income are all critical factors to take into consideration when choosing a pension retirement benefit. 

It’s important you work with a trusted advisor who can properly advise you on this process.