How to Decide the Right Time to Take Your Pension

Learn how to calculate the impact on your pension from changing your start date and evaluate the value of your pension based on your financial situation.

I recently received a question from a listener that sparked an interesting discussion about how to plan for your pension. In this episode of “Retirement Revealed” I dive into an example of how to calculate the total and annual value of your pension depending on when you start taking it.

The Listener’s Scenario

Is waiting until age 73 and a half too long to wait to start your pension if you and the wife are in excellent health? I’m 70 and would draw $7,500 but at 73 and a half it goes to $11,000 (a month).

Step 1: Assess Longevity

The first step in making any pension decision, much like with Social Security, is to evaluate your longevity. For this, I recommend using tools like Longevity Illustrator. Based on the information provided, I estimated a combined life expectancy of 24 years for our listener and his wife. This assumption is crucial because it impacts the overall value of the pension over time.

Step 2: Understand the Present Value

Another critical aspect is understanding the present value of the pension. This becomes especially important when comparing a lump sum versus monthly payments. For instance, if someone offered you $500,000 today or $2,000 per month for the rest of your life, you need to translate that monthly payment into today’s dollars. I use tools like the Schwab Fixed Income Calculator to do this.

Evaluating the Numbers

Let’s break down the numbers for our listener:

  • At age 70, the monthly pension is $7,500.
  • At age 73.5, the monthly pension increases to $11,000.

Assuming a combined life expectancy of 24 years:

  • Starting at age 70: $7,500 per month for 24 years equals approximately $2,160,000.
  • Starting at age 73.5: $11,000 per month for 20.5 years equals approximately $2,706,000.

This shows a 25% increase in expected payments by waiting until 73.5.

How does this growth rate compare to Social Security?

To put it in perspective, Social Security typically grows by about 8% per year if you delay it. In this case, the listener’s pension grows from $7,500 to $11,000 over three and a half years, which translates to an annual growth rate of 11.6%. This is significantly higher than Social Security’s growth rate, indicating that waiting could be beneficial.

How does this growth rate compare to annuities?

One of my preferred methods is to compare the pension amount with what an insurance company would offer for a similar annuity. For instance:

  • To receive $7,500 per month starting today, it would require approximately $1,266,000.
  • To receive $11,000 per month starting at age 73.5, it would require approximately $1,529,000.

This means waiting adds an expected return of $263,000 or 21% more, purely by delaying the pension.

Personalized Pension Planning

Not everyone’s pension will allow for such flexibility, but many do. The key is to gather all the information and make a well-informed decision. Remember, the goal is not just to maximize your pension today but to ensure you get the most value over your lifetime.

Maximizing Retirement Income

When planning your retirement, it’s essential to consider all sources of income: pensions, Social Security, 401(k)s, etc. Sometimes, waiting on one source (like a pension) while drawing from another (like a 401(k)) can maximize your overall retirement income. For our listener, delaying the pension while potentially using traditional IRA or 401(k) funds could provide additional benefits, such as reduced required minimum distributions (RMDs) or opportunities for Roth conversions.


The decision to delay a pension requires careful consideration of various factors, including longevity, present value calculations, and overall retirement strategy. For our listener, waiting until age 73.5 appears to offer significant financial benefits. However, this analysis is specific to their situation. Always remember to evaluate your options thoroughly and seek professional advice tailored to your unique circumstances.

If you have more questions or need personalized advice, visit and click “Ask Jeremy a Question” in the top right-hand corner. 

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