February 28, 2023 | Episode 54

Early Retirement - Navigating the Gap Years - Understanding Your Pension

What is a pension

A pension is in a lot of ways like Social Security. It is a benefit you have earned and are entitled to at some point.

However, pensions can differ from Social Security in a lot of ways. Credit Risk of the underlying institution and more distribution options, such as


  • Period Certain,
  • Pop Ups,
  • Higher Early Benefits,
  • Single Life,
  • Options for Survivor %

Common to have a cash-out option, more survivorship options, and less likely to get a COLI

Like Social Security, when selecting benefits, you must consider different variables. Because pensions offer different options, it is more complicated.


  • Cash-out option – needs, tax brackets, other assets, investment profile
  • Survivorship – survivor needs, other alternatives for the survivor, reduction on benefits due to survivorship option
  • Credit Risk – you are tethering yourself long-term to the financial management of the entity backing the pension
  • Early Retirement – pensions are designed (specific to each institution) to promote the retirement behaviors that the entity desires. For every pension plan, there is a sweet spot. That is where you can get the maximum benefits you are entitled to. There are often cliffs built in. So if you are too early, you get a significant reduction, penalizing you. And if you are too late, benefits flatten out and stop growing, essentially giving you no additional value to keep working.

A Real Example of Planning At Work! Retiree age 55 with a cash option pension, cash, IRA, and 401k.

Thanks to our sponsor, S.E.E.D. Planning Group! S.E.E.D. is a fee-only financial planning firm with a fiduciary obligation to put your best interest first. Schedule your free discovery meeting at www.seedpg.com

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