Jill on Money with Jill Schlesinger

Episode Summary: "Pension Lump Sum or Annuity?"

Date: January 5, 2026
Host: Jill Schlesinger, CFP®
Guest Caller: Amy from Iowa
Co-host/Expert: Mark

Episode Overview

In this episode, Jill Schlesinger fields a call from Amy, a listener pondering a critical retirement decision: should she opt for a pension lump sum or take an annuity? Amy is planning retirement within the next 18 months and is seeking guidance on the best option, considering her family situation, financial resources, and desire for both security and potential legacy. The discussion highlights the practical, emotional, and strategic angles of major retirement decisions, offering actionable insights for listeners facing similar crossroads.

Key Discussion Points and Insights

1. Amy's Background and Financial Snapshot

[03:22 – 08:31]

• Amy, 58, from Iowa, is hoping to retire in about a year and a half, coinciding with turning 60.
• Married to a 68-year-old husband who retired 3.5 years ago.
• They have three adult children, two fully independent, and one who just graduated college.
• Amy’s current annual income: $225,000.
• Husband receives ~$2,300/month Social Security and ~$972/month pension (total ~$3,200/month taxable retirement income).
• Estimated monthly expenses in retirement: $10,000-$11,000 (including healthcare).
• Substantial retirement and investment savings:
  • 401(k), pre-tax: $1.5M
  • 401(k) Roth: $230K
  • Old 401(k) rollover IRA: $265.5K (pre-tax)
  • Old 401(k) Roth: $125K
  • Husband’s IRA: $410K (pre-tax), Husband’s Roth: $195K
  • Brokerage account: $490K
  • Owns primary home, no mortgage, valued at ~$640K
  • Rental property: ~$65K value, $700/month income

2. The Pension Decision: Annuity vs. Lump Sum

[06:22 – 10:52]

• Annuity Option: Wait until age 62; then receive a little over $4,000/month (life only; slightly reduced for a survivor benefit, which would provide less to Amy due to husband being older).
• Lump Sum Option: Take over $600,000 as a lump sum at retirement (in 18 months); no further growth on lump sum during waiting period.
• No cost of living adjustment (COLA) on annuity.
• Important considerations:
  • Legacy: Annuity disappears at death (unless reduced for survivor); lump sum becomes an asset for heirs.
  • Risk Preference: Annuity offers simplicity and certainty; lump sum requires ongoing money management.
  • Asset Impact: Adding $600K to brokerage pushes total investable assets past $3M, creating more flexibility for withdrawals and estate planning.

Jill’s Framing:

“Do I like the guarantee to make my life a little bit easier or do I really wanna make sure that I pass assets to my kids as much as possible or have it for myself? That's the $600,000 question.” – Jill [10:56]

3. Personal Preferences and Family Needs

[09:43 – 12:31]

• Jill asks about Amy's comfort with money management, which has historically fallen to her in the household.
• Amy expresses confidence in her own investing abilities and leans toward keeping options open for her children.
• Husband was a moderate earner ($50K/year when working), highlighting the power of disciplined saving.
• Jill and Mark suggest Amy's strong financial position means she can't really make a “bad” choice but underline personal preference and legacy desires.
  • Mark: “A lot of this is just personal preference. You know, what kind of legacy they want to leave for their kids, if that's important to them.” [12:24]

4. Financial Planning and Practical Considerations

[12:31 – 14:27]

• Amy confirms an interest in passing on wealth to her children.

• Most at Amy’s company seem to choose the lump sum, likely due to the lack of COLA and increased flexibility.

• Jill’s verdict: Lean towards lump sum for flexibility and legacy, but reiterates there is no “bad” option given the family's assets.

• Jill offers key advice on estate planning:

  “Before you get all excited, you should revisit your estate planning because you have now grown kids, right. And if something were to happen to both of you, those kids would get a lot of money at once.” [13:14]

• Amy has already recently updated estate documents.

Notable Quotes & Memorable Moments

• Jill's Framing of the Decision:

  “If you died three years from now, your kids don't get anything unless you said to me, like, oh my God, I hate managing money. It's the worst. I'm kind of leaning towards lump sum on this one, Mark.” — Jill [10:19]

• Mark's Reassurance:

  “As you like to often say, you know, you're not going to make a bad decision here.” — Mark [09:32] “You can definitely retire.” — Mark [09:41]

• On Saving and Compounding:

  “Here’s a couple that made money, didn't go crazy, socked it away. This is the power of socking it away. Just, like, put it away. Yep, you put it away, it grows. And this is like the magic of compounding.” — Jill [13:58]

• Final Affirmation:

  “Go forth and give your notice and not worry about a thing. You're in very good shape, really, Amy, and congratulations… So nice to talk to people who… you make good money. This is the power of socking it away.” — Jill [14:14]

Important Timestamps

• [03:22] — Amy introduces her situation and retirement timing
• [05:35] — Family income and retirement budget details
• [06:22] — Pension options laid out (annuity vs. lump sum)
• [09:32] — Mark reassures that either path is sound
• [10:36] — Jill discusses the pros/cons of lump sum vs. annuity
• [13:11] — Jill leans towards the lump sum for flexibility and family legacy
• [13:14] — Estate planning reminder for significant assets

Takeaways for Listeners

• Both annuity and lump sum can be valid, but personal comfort with risk, management preference, and legacy intent should guide the choice.
• Guarantee of income vs. opportunity for heirs is the central trade-off.
• The absence of a cost of living adjustment in a pension annuity makes the lump sum potentially more attractive.
• Strong saving and planning habits are the backbone of long-term wealth and flexibility.

Closing Advice from Jill

“If you're like Amy… looking into the future and you don't know what is it that you should be doing with a pension benefit, or… whether or not you can really make a decision about this… get in touch with us… And, of course, let us know if you'd like to come on the air live. We love, love to talk to you live.” — Jill [14:29]

Episode in a nutshell:
Jill and Mark walk Amy—and by extension all listeners—through the practical and emotional considerations of a major pension decision. The episode underlines the value of diligent saving, thoughtful risk assessment, and clear-eyed legacy planning, offering actionable wisdom in straightforward, jargon-free language.