For many Americans, a pension is one of the largest and most important financial assets they hold in retirement. After decades of work, you finally reach the point where your pension becomes available—and the decision you make next can impact your income, security, and financial flexibility for the rest of your life. This leads many retirees to ask the same pivotal question: What should I do with my pension after I retire?

Whether you earned your pension through a government job, union membership, education, military, corporate employment, or nonprofit work, your choices generally come down to two paths: keep the income offered by the pension plan, or take control of the funds through a rollover. Each option carries unique advantages and long-term consequences, and the right choice depends on your income needs, risk tolerance, health, family structure, and how much control you want over your retirement assets.

At Diversified Insurance Brokers, we help retirees nationwide compare their pension payout options, evaluate guaranteed income strategies, and determine when it makes sense to keep the pension versus when to take control of the lump sum through a safe rollover. This guide breaks down how pensions work in retirement, the choices you’ll face at the moment of retirement, and how to evaluate each option to protect your income for life.

Understanding How a Pension Works at Retirement

Before deciding what to do with your pension after you retire, it’s important to understand how pensions operate at the income stage. A pension is designed to pay you a guaranteed stream of income for life or for a specific period. But most plans also offer a lump-sum payout option at retirement, which gives you full control over the money.

You can review a full explanation here: How Does a Pension Work?

When you retire, your pension provider will typically present you with several choices:

• Lifetime monthly pension payments
• Joint-and-survivor income options
• Period-certain income (10, 15, or 20 years)
• A one-time lump-sum payout

The right option depends on your goals. Many retirees want predictable monthly income—something similar to Social Security. Others want more flexibility, more control, and better legacy benefits, which pushes them toward the lump-sum option.

Keeping Your Pension: Choosing the Monthly Payment

One option is to keep the guaranteed monthly income offered by the pension. This may be appealing if you want consistency, simplicity, and a stable retirement “paycheck” that arrives every month for life.

Many traditional pensions offer several payout structures:

Single-Life Payout

This pays the highest monthly amount, but the payments stop when you pass away. If you have a spouse or dependents who rely on your income, this may not provide enough protection for them.

Joint-and-Survivor Payout

This option pays you a smaller monthly amount but continues paying your spouse a percentage (typically 50%–100%) of your benefit after your death. While this offers peace of mind, it often comes with a significant reduction in the monthly payout.

Period-Certain Income

Your pension may allow a 10-, 15-, or 20-year period-certain option. If you pass away during that period, remaining payments continue to your beneficiary. After the term ends, payments stop.

While many retirees choose to keep the pension, it comes with limitations:

• No access to the principal
• No liquidity for emergencies
• No way to change payout options later
• Reduced payments for joint-life options
• Limited legacy benefits

For retirees who want more control, a lump-sum rollover may be a better fit.

Taking the Lump Sum: Rolling Your Pension Into an Annuity

One of the most powerful strategies for retirees wondering what to do with their pension after they retire is taking the lump sum and rolling it into a safe, guaranteed annuity. This option preserves your pension value, allows for principal protection, and can greatly enhance flexibility and legacy options.

See the full rollover process here: How to Transfer a Pension to an Annuity.

A pension-to-annuity rollover can offer several advantages:

Control of your money
You decide how the funds are invested, protected, or structured for income.

No market losses (fixed and indexed annuities)
Your pension value can be protected even in down markets.

Lifetime income that rivals or exceeds the pension payout
Many annuities offer competitive lifetime income options while still preserving flexibility.

Better survivor benefits
Unlike joint-and-survivor pensions, which reduce your payout, annuities can offer full continuation for a spouse.

Legacy protection
Any remaining value can pass to beneficiaries—something most pensions cannot offer.

Liquidity for emergencies
Many annuities allow free withdrawals or accelerated benefits for long-term care needs.

Retirees who choose the lump-sum rollover typically do so for one or more reasons: better survivor options, more predictable returns, stronger guarantees, or simply the desire to control their own money.

Building Guaranteed Income With Your Pension Rollover

When converting your pension into an annuity, you can choose an income rider that provides lifetime income similar to the pension—but often with more flexibility. You can also choose to delay income, which increases payout amounts through deferral bonuses.

Many retirees coordinate annuity income with Social Security and other accounts, creating a stable income foundation that isn’t affected by the stock market or economic downturns.

If you’re wondering how much guaranteed income your pension could provide when rolled into an annuity, the calculator below shows your options.

Lifetime Income Calculator

Coordinating Pension Decisions With Your Other Retirement Accounts

If you have Social Security, a 401k, a 403b, a 457b, or personal savings, your pension decision affects the entire structure of your retirement income. Many retirees use the pension (or annuity income from their pension rollover) to cover essential expenses while using Roth or taxable accounts for discretionary spending.

Safe, predictable income from an annuity can also reduce pressure on investment accounts, helping them last longer by protecting them from withdrawals during down markets.

How Diversified Insurance Brokers Helps With Pension Decisions

Because pensions are complex and often irrevocable once you choose a payout method, it’s critical to compare your options carefully. As an independent nationwide agency, Diversified Insurance Brokers helps retirees compare guaranteed income from their pension to what they could receive through a rollover to a fixed or indexed annuity.

We examine payout rates, survivor options, liquidity, legacy features, and long-term growth potential—ensuring your pension supports your retirement goals with maximum security and flexibility.

Related Pages

• How Does a SIMPLE IRA Work?
• How Does a 457b Work?
• How Does a TSP Work?
• How Does a Keogh Plan Work?
• How Does a Profit-Sharing Plan Work?