Podcast Summary: "To PLOP or Not to PLOP?"
Episode: Jill on Money with Jill Schlesinger
Release Date: June 4, 2025
Host: Jill Schlesinger, CFP®
Platform: Audacy
Introduction and Context
In the June 4th episode of Jill on Money with Jill Schlesinger, host Jill Schlesinger delves into the complexities of pension plans, focusing specifically on the decision to take a partial lump sum payout, commonly referred to as a "plop." This episode features a detailed discussion with listener Matt from Ohio, who seeks advice on handling his wife’s upcoming partial lump sum pension option.
Listener's Financial Situation
Matt’s Profile:
- Age: 57 (approaching 58)
- Employment: Retired from full-time work but continues part-time due to an incomplete pension
- Income:
- Pension: $3,600/month for life with 100% survivorship
- Part-Time Job: $60,000 to $90,000 annually
- Additional Income: $15,000 from another part-time job
- Expenses: Approximately $10,000/month, including support for an adult child
- Assets:
- Pension Savings: $250,000 in Roth and Traditional accounts
- Brokerage Accounts: $310,000
- Inherited IRA: $115,000
- Home: Valued at $350,000 with a $72,000 mortgage at a 2.875% rate
- Wife’s Profile:
- Age: 55
- Employment: Educator, planning to retire in a year
- Current Income: $110,000 annually
- Pension: Potential increase to $6,138/month upon retirement with various survivorship options
Understanding Pension Options:
Jill begins by unpacking the plethora of options Matt’s wife has regarding her pension. The choices include:
- 100% Survivorship: Ensures full pension benefits continue to the surviving spouse.
- Partial Lump Sum (PLOP): Allows taking a portion of the pension as a lump sum, which reduces the monthly pension payments proportionally.
- Other Survivorship Percentages: Options range from 75%, 50%, 25%, down to 0%, each affecting the monthly payout accordingly.
Key Insight:
Jill Schlesinger [04:24]: “Maybe we can work backwards about who you guys are, where you are in your lives and then we'll reverse engineer what you need to do.”
Financial Analysis and Strategy
Assessing Current Needs:
- Matt and his wife currently cover their expenses primarily with Matt’s $3,600/month pension.
- Combined with Matt’s part-time income, they face significant monthly expenses, especially with supporting an adult child.
- The discussion reveals that their current pension and income slightly fall short of their monthly expenditures.
Considering the PLOP Option:
- Minimum PLOP: $41,000 lump sum, reducing monthly pension to $58.70.
- Maximum PLOP: $235,000 lump sum, reducing monthly pension to $4,600.
Jill’s Assessment: Jill suggests that mathematically, Matt and his wife are close to meeting their financial needs without taking a plop. However, Matt’s wife has concerns about the sustainability of the Ohio pension system, prompting her preference to take a plop for added financial security.
Strategic Recommendations:
- Maintain Current Pension Structure: Since their combined pensions nearly cover their expenses, this option provides stability without complicating their financial setup.
- Taking the PLOP for Peace of Mind: Addressing the psychological comfort of having a lump sum can alleviate fears about the pension system’s future.
Key Insight:
Jill Schlesinger [09:07]: “I’m not sure you’re going to need it, but I do think because you’re going to have income that you’ve got like, so you pull the money out of the inherited IRA, that’s fine.”
Tax Implications and Investment Strategies
- Tax Considerations: Taking a plop can reduce the monthly pension but may place some of the lump sum into higher tax brackets. However, Matt notes that taking the maximum plop could reduce their effective federal tax rate from 22% to 15%.
- Investment Plans:
- Matt intends to invest the plop from his wife’s pension into her Roth IRA and brokerage accounts, ensuring the funds are actively managing growth.
- Utilizing the inherited IRA to support ongoing income needs until Social Security kicks in.
Key Insight:
Matt [15:10]: “Yeah, yeah, yeah, I get that.”
Emotional and Psychological Considerations
Jill emphasizes the importance of psychological comfort in financial decisions. Despite the mathematical benefits of maintaining the current pension structure, Matt’s wife’s anxiety about the pension system's sustainability justifies opting for a plop to ensure peace of mind.
Key Insight:
Jill Schlesinger [17:07]: “Peace of mind comes first.”
Final Recommendations and Conclusion
After thorough analysis, Jill recommends that Matt proceed with the plop to satisfy his wife’s concerns about the pension system's longevity. This approach balances their financial needs with the emotional reassurance his wife requires.
Key Takeaways:
- Combining pension incomes with part-time earnings can nearly meet monthly expenses, but supporting dependents may necessitate additional strategies.
- Taking a plop can offer financial security and emotional peace, especially when there are concerns about the pension system’s stability.
- Diversifying savings through Roth IRAs and brokerage accounts ensures continued income growth and financial flexibility.
Notable Quotes:
- Jill Schlesinger [04:24]: “Maybe we can work backwards about who you guys are, where you are in your lives and then we'll reverse engineer what you need to do.”
- Matt [10:34]: “Yes. Agreed. The concern that she has, and this is with a fair number of retirees out of the Ohio system, is that their system is not sustainable.”
- Jill Schlesinger [17:07]: “Peace of mind comes first.”
- Matt [17:11]: “That's spot on.”
Final Thoughts
Jill concludes the episode by reinforcing the importance of personalized financial planning and encourages listeners to reach out with their financial questions. She highlights the value of balancing mathematical financial strategies with personal comfort and peace of mind.
Note: For personalized financial advice, listeners are encouraged to contact Jill through her website jillonmoney.com and explore additional resources such as her blog and other podcasts.