Lump Sum or Monthly Payments?

Summary

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Jill on Money with Jill Schlesinger

Episode: Lump Sum or Monthly Payments?

Date: September 1, 2025
Host: Jill Schlesinger, CFP®
Co-Host/Producer: Mark (Financial Planner)
Caller: Ron (Midwest)

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Episode Overview

In this episode, Jill and Mark help a listener, Ron, navigate a key retirement decision: should his wife take a lump sum pension payout or opt for structured monthly payments with survivor benefits? The discussion unpacks the family’s finances, lifestyle needs, and various tradeoffs, delivering concrete, jargon-free advice for anyone facing a similar crossroad in their financial planning. The tone is supportive, practical, and refreshingly direct, with both hosts emphasizing actionable steps and personalized analysis.

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Key Discussion Points & Insights

1. Ron’s Financial Situation

Timestamps: [02:09]–[03:13]

• Ages & Income:
  • Ron is 58, his wife is 59.
  • Ron earns $125,000/year in his current job and receives a $50,000/year pension from a previous employer.
  • His wife receives $6,500/month from long-term disability.
• Retirement Savings:
  • $260,000 in Roth IRAs.
  • $2.2 million in traditional IRAs/401(k)s.
• Monthly Expenses:
  • "Probably about $11,000." (Ron, [02:57])
• Disability Update:
  • Wife does not currently need in-home care.

2. Pension Options Under Consideration

Timestamps: [03:38]–[04:38]

• Option 1: Lump sum payout of $440,000.
• Option 2: Continue $6,500/month disability payments until age 65, then a pension of $2,400/month, with a $1,500/month survivor benefit if Ron’s wife predeceases him.
• Survivorship:
  • The $6,500 payments would end upon wife's death, but a $1,500/month survivor benefit would start at age 65.

3. Retirement Timeline & Social Security

Timestamps: [04:43]–[04:57]

• Ron plans to retire around age 60.
• His projected Social Security:
  • $2,900/month at full retirement age.
  • $3,600/month at age 70.

4. Jill and Mark’s Advice Process

Timestamps: [04:57]–[08:27]

• Mark notes he is “leaning lump sum” in this scenario, contrary to his usual approach, because of the family's already strong pension and retirement accounts.
  • Quote: "I'm leaning, I'm really leaning lump sum." (Mark, [05:24])
  • Reasoning: If Ron's wife passes before 65, the lump sum retains value and allows more flexibility, considering Ron’s own pension, projected Social Security, and significant savings.
• Mark emphasizes the couple's strong position to self-manage withdrawals from their retirement funds, continuing their ongoing Roth conversions and utilizing traditional IRA funds when needed.
  • Quote: "Wow, I've got a couple million bucks here. That's going to go a long way to get... You really may not [need to claim Social Security until 70]." (Mark, [06:41])
• The psychological side: The importance of not hesitating to draw down retirement savings as needed in retirement.
  • Quote: "Don't do that weird thing that happens when people retire, which is, ‘Oh, I don't want to pull money out of my retirement account.’ Well, you have to...we want you to do that." (Mark, [07:05])

5. Other Financial Considerations

Timestamps: [07:52]–[08:23]

• Home:
  • Valued at $550,000, with $122,000 left on a mortgage at 2.875%.
  • Mark advises against prepaying this low-rate mortgage.
• Children:
  • “Launched” (i.e., financially independent).
• Estate Planning:
  • Estate documents are up-to-date—a relief for the hosts.

6. Open-Ended Invitation for Further Insight

Timestamps: [08:27]–[08:44]

• Mark requests that Ron update them with his advisor’s opinion, highlighting the show's commitment to learning and openness to alternative perspectives.
  • Quote: "If they say, ‘Oh, no, no, you should definitely take the pension.’ I'd love to hear from them about that." (Mark, [08:40])

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Notable Quotes & Memorable Moments

• On the couple’s savings discipline:
  • "Holy smokes, you guys have saved a ton of money." (Mark, [02:45])
• On why leaning lump sum is right here:
  • "If something were to happen to her, you'd have all of the money already." (Mark, [05:14])
• Reassuring the caller:
  • "You guys have done a tremendous job of saving, really. I think you're in good shape." (Mark, [07:32])
• On the importance of spending in retirement:
  • "We want you to do that. We want money to come out of that. You'll pay it at this...hopefully a decently low tax bracket." (Mark, [07:09])

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Timestamps of Key Segments

• [02:09] – Ron introduces his family’s situation and financial snapshot
• [03:38] – Detailed breakdown of the two pension options
• [04:57] – Social Security projections and retirement income planning
• [05:24] – Mark’s reasoning behind favoring the lump sum option
• [07:52] – Housing, mortgage, and other assets discussed
• [08:19] – Estate planning check-in
• [08:27] – Invitation for feedback from the caller's financial advisor

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Tone & Takeaways

• Tone: Reassuring, direct, and collaborative. Jill and Mark foster a nonjudgmental and problem-solving environment.
• Key Takeaways:
  • The best pension decision is highly personal, depending on total assets, income needs, and survivorship considerations.
  • Even strong savers may need permission to confidently draw down assets in retirement.
  • Maintaining financial flexibility—especially in uncertain health situations—often favors lump sum options when supported by other reliable income streams.
  • Always coordinate with trusted advisors and seek multiple perspectives, especially for big decisions.

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Final Actionable Advice

• Consult with your financial advisor and be open to multiple viewpoints.
• Take an honest inventory of all assets and income for a full retirement needs analysis.
• Recognize the value of both guaranteed income and liquidity; the right balance depends on your unique circumstances.

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Transcript

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[Jill (Financial Planner)]

Welcome to the Jill on Money show. It's Monday, September 1st. I believe it's Labor Day. I hope so, Mark. So make sure that if I've made a mistake on this, you'll let me know if you've got the day off and you're listening to this a day or two later.

[Mark (Financial Planner)]

No problem.

[Jill (Financial Planner)]

Remember, this is the program that tries to take the mystery out of your financial life. We really are trying to help you identify the options that are in front of you. Whether it's retirement, whether it's funding college. Maybe you're thinking about selling a house, buying a house. Maybe you're just getting started on your financial journey. Whatever it is, we are here to help. Both Mark and I are certified financial planners and we love doing this. We love helping you get where you want to go or at least figure out the different ways to get there. So if you've got a question, just go to jillonmoney.com that's our website. Click the contact us button, write us that note. And if you'd like to join us on the air, check the box, Mark. We'll do everything else. Hey, don't forget to sign up for the free weekly newsletter. Comes out every single Friday. Mark does a great job with that. Right now let's talk to Ron, who joins us from the Midwest.

[Ron (Caller)]

My wife and I need to make a decision on her pension options.

[Mark (Financial Planner)]

Okay, let me tell you more.

[Ron (Caller)]

Well, I'm 58. My wife is 59. I make $125,000 a year and I also draw a pension of $50,000 from a previous employer.

[Mark (Financial Planner)]

Wow.

[Ron (Caller)]

My wife is currently collecting $6,500 a month on long term disability. And as far as our retirement savings, we have about 260,000 in Roth accounts and about 2.2 million in traditional IRAs and 401s.

[Mark (Financial Planner)]

Holy smokes, you guys have saved a ton of money. Out of curiosity, since you have so much income right now, what do you need to live on? What's kind of your monthly nut?

[Ron (Caller)]

Probably about $11,000.

[Mark (Financial Planner)]

And your wife is on long term disability. Does she need care in the home? You know, she. I'm just trying to get a sense of her condition and whether Those costs of $11,000 a month could rise.

[Ron (Caller)]

No, she doesn't need care at this point.

[Mark (Financial Planner)]

All right, good. On your $125,000 a year, are you currently maximizing your retirement contributions?

[Ron (Caller)]

No, I'm only doing the 4% to get the match because we've been keeping our withholding quite high to do Roth conversions on an annual basis.

[Mark (Financial Planner)]

Oh, that's great. So do we have that. What's the choice on the. That's being presented to you.

[Ron (Caller)]

Okay. The two options are she could retire under a traditional retirement and have a lump sum option of $440,000 a year or not a year. 440,000 total.

[Mark (Financial Planner)]

Right.

[Ron (Caller)]

Her other option would be to retire under disability. She would continue to collect her $6,500 until age 65, and then at that time, she would have a pension of $2,400 a month, and it would pay me $1,500 a month if she died first.

[Mark (Financial Planner)]

Okay, so there is a. So there's a survivor benefit.

[Ron (Caller)]

Right.

[Mark (Financial Planner)]

Okay. If she retired under the. And collecting her disability. Right. If she made that election already and she died before she got to that, you know, with the reduction at 65, what would happen to the $6,500 a month that she's currently getting?

[Ron (Caller)]

It would go away.

[Mark (Financial Planner)]

Okay, and then you would have. Would you have any benefit of hers or not?

[Ron (Caller)]

Yes, there would be a fifteen hundred dollar a month.

[Mark (Financial Planner)]

Okay, so that would be. Okay. And what about your plans for your own retirement? What are you thinking?

[Ron (Caller)]

Well, I'm thinking probably around 60.

[Mark (Financial Planner)]

If you were to look at your own Social Security benefit, what would that be?

[Ron (Caller)]

2,900 at full retirement age and 3,600 at age 70.

[Mark (Financial Planner)]

Okay, so you would have. Let's just look at your full retirement age, 2,900 plus you'd still have your 50 grand a year of pension Right. So let's just say I'm leaning lump sum. And I'll tell you. And I don't usually, but I'll tell you why I'm leaning lump sum. Because of the idea that if something were to happen to her, you'd have all of the money already. You have tons of money. And I think you, probably because you personally have your pension, you would get, you know, if something did happen to her, you would have, you know, you'd have your pension, you'd have your Social Security benefit and you'd have all this money. How do you feel about managing this money yourself? Who's managing the $2.2 million? I was about to say trillion. $2.2 trillion. Million dollars. I'm sorry, I just. A trillion. How do you feel about managing that?

[Ron (Caller)]

Well, we're working with a financial advisor now.

[Mark (Financial Planner)]

What do the financial advisors say in terms of the pension choice?

[Ron (Caller)]

Going to be speaking with them next week. I wanted to reach out to you first.

[Mark (Financial Planner)]

So this was pointed out to us where I used to always lean to pension. And then a financial advisor that we're friends with of the show, he had pointed out to me, yeah, but if something happens before you get, you know, you're sort of at a certain age, you then have all the lump sum for the Survivor. So that's the only reason that I've really shifted quite a bit. I'm leaning, I'm really leaning lump sum. You know, what you could do, if you think about it, is that you could keep converting your money slowly but surely. Right. Maybe what I would do is I like you getting the 4% match, and I also like that you're converting. But, you know, if you get to, say, age 60, you may not even have to convert. You could just start pulling money out of your traditional and using that to supplement your needs. Wow, I've got a couple million bucks here. That's going to go a long way to get. You might not even need to claim your Social Security benefit till you're 70. You really may not. How's your health? Are you in decent health?

[Ron (Caller)]

Yes.

[Mark (Financial Planner)]

I think that you're in good shape. I think you can do this as long as you're comfortable feeling like, all right, I'm going to have to, like, don't do that weird thing that happens when people retire, which is, oh, I don't want to pull money out of my retirement account. Well, you have to, like, we want you to do that. We want money to come out of that. You'll pay it at this. You Know, hopefully a decently low tax bracket. But if you do need 11 grand or even 12 grand a month, you have enough money to get you there. You really do. I mean, your pension and Social Security is, you know, going to get you probably halfway there from the rest. You're going to have a pile of money that you've saved. So you guys have done a tremendous job of saving, really. I think you're in good shape. Do you have any other assets that we need to worry about? Like a home? Is that paid for? Do you have a mortgage? What's going on?

[Ron (Caller)]

No, our home is probably worth about 550, and we have a mortgage of 122 left.

[Mark (Financial Planner)]

Oh. So that's kind of not nothing. What's the rate on that?

[Ron (Caller)]

2.875.

[Mark (Financial Planner)]

Yeah. You're not paying that down. Do you have some kids that are floating around also?

[Ron (Caller)]

They're launched.

[Mark (Financial Planner)]

Launched. What else do I worry about with you? Anything is there if I've missed anything besides your pressing question?

[Ron (Caller)]

No, I don't think so.

[Mark (Financial Planner)]

You have your estate documents done?

[Ron (Caller)]

Yes.

[Mark (Financial Planner)]

Did you know I was going to ask that? And then you were very happy to know that you had those.

[Ron (Caller)]

Yes.

[Mark (Financial Planner)]

Do me a favor. When you talk to your financial advisor, if they come up with something different, let us know. I'd be interested in that because maybe I don't want to necessarily think I'm the only voice here. So maybe there's a different way. If they. If they say, oh, no, no, you should definitely take the pension. I'd love to hear from them about that.

[Ron (Caller)]

Okay.

[Jill (Financial Planner)]

If you'd like a second opinion, a third opinion. If there's something going on in your life and you just want a little bit of guidance or mentoring or coaching, get in touch with us. Go to jillonmoney.com, click the contact us button, write us a note. And if you'd like to join us on the air live, just check that box and we'll take it from there. There you can subscribe to us on the Odysee app or wherever you find your favorite podcast. Please leave us a rating and review wherever you listen, and, of course, try to lift someone up. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow.

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