Sheila has just accepted a new job. Jon is retiring. They both have Defined Benefit pensions with their current employers and now they have to choose … either:
Sheila and Jon each face a serious, and difficult, decision. So many factors depend on their personal situations, and are outside their control. Getting professional advice is a good idea, but Jon wonders if the advice is truly unbiased. After all, his lump sum is rather attractive, and could generate hefty fees.
This is a complicated decision, but it can be boiled down to a few basic considerations:
Let’s consider Jon’s decision for a minute. Here’s a simple way he could crunch the numbers …
What about Sheila? She’s not retiring yet, so she uses a slightly different approach:
I’m actually a big proponent of erring on the cautious side and taking the pension. The basic considerations above provide significant food for thought:
At the end of the day whatever decision Sheila or Jon make will probably not be perfect. They both need to take their time, weigh all the factors, think long term and be wary of advice that’s biased in the advisor’s favor.
At RetirementWorks, our mission is to provide independent, unbiased and factual information solely for educational purposes.