Retiring With a Pension? Four Things to Know
The road to a secure retirement is slightly more intricate for people with pensions. Here are four key issues to consider to make the most out of yours.


The current retirement planning environment has shifted substantially over the past few decades. Pensions, once a staple of retirement income, are now far less common.
According to the Federal Reserve, only 20% of people are able to rely on a pension when they retire.
This decline means that those who do have pensions face unique challenges that require a tailored approach to their retirement planning.

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Compared to other retirement savings plans like 401(k)s and IRAs, pensions demand a more complex planning strategy. Unlike defined contribution plans where the retirement savings depend on individual investment choices, pensions provide guaranteed income.
However, this guarantee does not simplify the planning process. Instead, it introduces its own set of complexities, including income calculations, survivorship benefits and tax implications.
Understanding how to manage a pension plan effectively is crucial to maximizing its benefits. This involves not just a cursory knowledge of pensions, but also a deeper understanding of how they interact with other income sources and financial instruments.
Here are the four main things you need to consider to make the most out of your pension:
1. Work with knowledgeable advisers
Retiring with a pension requires more advanced planning than a typical retirement. This isn't your run-of-the-mill retirement strategy; we’re talking about estate planning, sophisticated tax maneuvers like Roth conversions, tax-efficient income planning and understanding the widow's penalty.
Working with advisers who are well-versed in pension planning is critical.
Without the right expertise, you may leave money on the table or inadvertently increase your tax burden.
An adviser who specializes in pension planning can run the detailed analyses you need and provide strategies tailored to your unique financial situation.
For example, at Peak Financial Retirement, we work with what we call the 2% Club — those who have pensions and $1 million or more saved, which allows us to cater to our clients’ unique needs.
2. Tax implications are complex
Many people assume they will be in a lower tax bracket when they retire, but this isn’t always the case for those with pensions. With sources like Social Security, required minimum distributions (RMDs) and your pension, your income may actually place you in a higher tax bracket.
Advanced tax planning moves, such as Roth conversions, can be a great strategy. Converting taxable accounts to tax-free Roth accounts might result in immediate tax implications, but it can save you a substantial amount in the long run by reducing the taxable portion of your retirement income.
3. Plan for the widow's penalty
One critical element often overlooked is the widow’s penalty. This refers to the financial strain that surviving spouses face if proper planning isn’t done.
The loss of one Social Security benefit combined with potentially higher tax brackets for single filers can significantly affect a surviving spouse’s financial well-being.
Consider maximizing Roth conversions or employing life insurance to cushion this blow. Proactively addressing the widow’s penalty in your retirement plan can help your spouse remain financially secure, even when you're not around.
4. Comprehensive pension planning
Effective planning isn’t just about making isolated decisions. It’s about integrating various elements, what we like to call the five pillars of retirement planning. It helps to work with a team that has a CPA in-house to prep for taxes and collaborates with an estate planning attorney for you.
Remember, a detailed and individualized approach is key to thriving in retirement. By incorporating these four elements into your planning, you'll be well-equipped to enjoy a more secure and prosperous retirement.
Thinking about diving deeper into pension planning? We would encourage you to seek professional advice from a team that you can trust so that you have the peace of mind that your retirement is in capable hands.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
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As Founder and CEO of Peak Retirement Planning, Inc., Joe Schmitz Jr. has built a comprehensive retirement planning company focused on helping clients grow and preserve their wealth. Under Joe’s leadership, a team of experienced financial advisers use tax-efficient strategies, investment management, income planning and proactive health care planning to help clients feel confident in their financial future — and the legacy they leave behind. Joe has also written two books, I Hate Taxes (request a free copy) and Midwestern Millionaire (request a free copy). You can find Joe on YouTube by clicking here, where he creates educational videos for those in or near retirement with $1M or more saved.
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