In this episode of Unlocking Hidden Value, we explore the critical decision between taking a lump sum or opting for a pension in retirement. We’ll guide you through key considerations—returns, taxes, and legacy—to help you make an informed choice that aligns with your family’s goals.

Topics Discussed:

• Fixed returns vs. market growth potential
• Tax planning and flexibility
• Legacy considerations for families
• Aligning financial choices with personal values and goals

Transcript:

Lump sum versus pension. How do you decide? Like most good questions, it depends. In today’s Unlocking Hidden Value, we’re going to give you some criteria to think about when you make this decision. The lump sum versus pension decision is something that faces a lot of our clients. As in your retirement. When thinking about it, there’s a lot of things to factor in. The first is with a lump sum pension, you are locking in a fixed return for your life in perpetuity. However, if you are rolling it over into an IRA account, you are giving yourself the ability to outperform or gain more. So the first question is really on a return perspective, do you want to lock in a fixed rate or do you want to have the ability to grow those funds and maybe outperform you’re providing yourself more upside with, you’re providing yourself more upside by rolling it over. However, there’s more uncertainty.

The second area to consider is your flexibility and specifically around taxes. Locking in a pension gives you a steady monthly payment, but that also means that you have to pay taxes on that. Where a rollover, you decide when you take the money out and when you pay the taxes on it. This can give you a lot more flexibility when it comes to tax planning in retirement. The third thing to consider is legacy planning. If something were to happen to you and your spouse, the third thing to consider is legacy planning. If something were to happen to you or your spouse, that pension could disappear. Now with a lump sum, you have the ability to pass that on to future beneficiaries, thus preserving that value. In conclusion, the right decision is really what matters to you most. Is it flexibility? Is it taxes? Is it legacy? Or maybe it’s a combination of all of ’em. If you’re thinking about this decision and need help, feel free to reach out. If you’re thinking about this decision and need some assistance, feel free to reach out. We’re happy to help.

Lake Road Advisors, a Fee-Only, independent financial planning firm with offices in Corning, NY, Ithaca, NY and Portland, OR works with clients virtually all across the country. Paul Sydlansky, the founder of Lake Road Advisors LLC, has worked in the financial services industry for 20+ years. Prior to founding Lake Road Advisors, Paul worked at Morgan Stanley in Manhattan for 13 years. While at Morgan Stanley, Paul was a senior-level manager within the Institutional Equities Department. In 2018 he was named to Investopedia’s Top 100 Financial Advisors list. Paul received a Bachelor’s degree in Economics from Marist College and holds an MBA from New York University Leonard N. Stern School of Business. Paul is a CERTIFIED FINANCIAL PLANNER® and a member of the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network. They can be reached by phone at the Corning, NY office at (607) 438-2914, Ithaca, NY office at (607) 463-8400, or Portland, OR office at (607) 292-2172 or at the firm’s website at https://lakeroadadvisors.com/