Should I take my pension as a lump sum or monthly payments?

The monthly option is steady income for life, which the CFPB says substantially reduces the risk of running out of money. You do not have to manage investments or ride out market drops. A married worker in a traditional pension gets a joint and survivor payment by default, which pays the surviving spouse at least half. Choosing anything else requires the spouse's written, witnessed consent.

Insurance: private-sector pensions are typically insured by the Pension Benefit Guaranty Corporation. In 2026 the maximum PBGC guarantee for a single-employer plan is $7,789.77 a month at age 65 for a straight-life annuity, and $6,153.92 at 62. Take a lump sum and you give up that protection.

Rollover rules: a lump sum paid to you has 20% withheld for federal tax, even if you plan to roll it over. A direct rollover to an IRA or another plan avoids that withholding. If you are paid directly, you have 60 days to roll it over, and amounts not rolled over may be taxed and face a 10% additional tax on early distributions unless an exception applies.

Simple test: suppose the offer is $300,000 now or $2,000 a month for life. $300,000 / $2,000 = 150 months, or 12.5 years. If you live longer than that, the monthly option paid out more in raw dollars. This ignores investment growth, inflation and taxes, so it is a starting point, not a verdict. The CFPB also notes that buying a similar annuity from an insurer later will usually cost more.

What the comparison misses: if your pension has no cost-of-living raise, the monthly check loses buying power each year. A lump sum can erode through fees, market losses and inflation. The useful number is how much of your basic spending is covered by income that cannot run out.