As retirement gets closer, the focus starts to shift. For years it's been about how much you've saved. Now it needs to be about how that money will actually support you, and that's where some of the biggest decisions of your financial life show up.
Market swings, rising costs, longer life spans. None of that is within your control. What you can control is how your plan is built and how often you revisit it. One piece people tend to overlook here is purchasing power, simply what your money will actually buy down the road. Healthcare, housing, everyday living costs. Even modest annual increases compound over a retirement that could last two or three decades.
Timing and sequencing matter more than most people realize. When you start pulling income from different accounts, how those sources work together, when you adjust spending or check your assumptions again. None of these are one-time decisions. They shape how efficiently your plan carries you through retirement.
The lump sum vs. annuity decision
For anyone with a pension, and this includes a lot of union members I work with, one decision stands above the rest: take the lump sum, or take the annuity.
A lump sum hands you the full value of your pension up front, usually rolled into an IRA, and puts you in charge of investing and managing it for the rest of your life. An annuity gives up that control in exchange for a guaranteed monthly check for as long as you live. There's no universal right answer. It depends on your health, your spouse's needs, your other assets, and how comfortable you are managing a portfolio through market downturns.
Here's what makes this decision harder than it looks: most people are bad at estimating how long they'll actually live. Research from the Society of Actuaries has found that more than 40% of pre-retirees and retirees underestimate their own life expectancy by five years or more compared to actuarial data (Society of Actuaries). If you plan around a shorter retirement than you're likely to have, a lump sum can look more appealing than it should, and a decision like that is permanent. Once you take it, there's no going back to the monthly check.
This is exactly the kind of decision where working through the numbers with someone who does this regularly matters. An advisor can model both scenarios against your actual health, your spouse's income needs, and your broader portfolio, rather than a rule of thumb or whatever a coworker did.
Balancing everything else
Most people this age are juggling more than just their own retirement. Supporting kids, helping aging parents, managing a household budget that keeps creeping up. Without a clear plan, these pieces quietly pull against your long-term goals.
A well-coordinated plan helps you:
- Align your income sources so they work together instead of against each other
- Catch gaps before they become real problems
- Adjust as your situation, or the broader environment, changes
- Take pressure off having to make big decisions in uncertain moments
The goal was never to eliminate uncertainty. It's to feel ready for it anyway.
A few questions worth sitting with:
- Does my plan reflect what things actually cost today?
- How confident am I, really, in my income strategy over the next 20 to 30 years?
- If I have a pension, have I actually run the numbers on lump sum versus annuity, or am I guessing?
- When was the last time everything was reviewed together, not just piece by piece?
If it's been a while, let's fix that. I'll walk through your plan with you, including any pension decision that's still on the table, so you're positioned for the next stage with clarity instead of guesswork. Get started at pereirawm.com, or call me directly at (877) 997-7113.
Source: Society of Actuaries, "Longevity Risk Quantification and Management: A Review of Relevant Literature" (soa.org).