If you’re one of the lucky ones

Some Utahns still have a real pension, and if you’re one of them, count your blessings. Our public servants – teachers, state and county workers, police and firefighters covered by Utah Retirement Systems – earned one of the strongest, best-funded public pensions in the country. Hired before July 2011? Your URS Tier 1 plan pays a guaranteed monthly benefit for life. Built on a formula, not on how the market behaved, thirty years of service can replace around 60% of your salary, and it keeps coming whether stocks are up or down.

If you’re holding a pension, your big decisions aren’t about the market; they’re about structure. Start with the survivor option. The single-life payout gives you the biggest monthly check, but it stops the day you die. A joint-and-survivor election trims that check but keeps paying your spouse for the rest of their life. For a married couple, that slightly smaller check is often the most important insurance you’ll ever buy, protection against your spouse outliving you by 15 or 20 years on half the income.

Then, there’s the lump sum, common with private pensions and buyout offers. It’s just the present value of all your future checks, and because the math is tied to interest rates, today’s higher rates mean smaller offers than the near-zero years produced, making the monthly check look better by comparison. Take the lump sum and you’ve fired the pension fund and hired yourself as your own investment manager: You now own the market risk, the timing risk and the longevity risk. One study found that one in five people who take a lump sum run through it within five and a half years. Mind the tax bite, too — taken all at once, it’s ordinary income that can spike your bracket and your Medicare premiums, unless you roll it straight into an IRA.

If you don’t have a pension — build one

Now for the rest of us, which is most of us. If your “pension” is a 401(k) and a rollover IRA, you have something the pensioners don’t: total control. What you don’t have is a paycheck, and a pile of money – however big – won’t tell you how much you can safely spend or whether you’ll run out.

This is the whole reason I talk about fixed index annuities the way I do. You can take a portion of your savings – not all of it – and turn it into your own private pension: An FIA with a lifetime income rider pays a guaranteed check for life, no matter what the market does. In today’s higher-rate environment, those payouts are more generous than they’ve been in years. And unlike a single-life pension, which vanishes when you’re gone, whatever account value remains can pass to your kids, the monthly certainty your parents had, without giving up the legacy.

The goal isn’t to annuitize everything. It’s to cover your essentials – the mortgage, utilities, groceries – with guaranteed income, so Social Security and your personal pension pay the bills no matter what. Then the rest of your portfolio can stay invested for growth and the fun stuff, because a bad market year can’t touch your basic security.

The Utah angle

We’re self-reliant people here in Utah, and I’ve watched Silicon Slopes and the transplants pouring into Lehi and Draper bring plenty of 401(k) wealth but almost no pensions. Self-reliance doesn’t mean carrying every risk on your own back. Sometimes the most independent thing you can do is build yourself a paycheck that shows up every month, and then quit worrying about it. Whether you’re a retiring teacher weighing a survivor option or a tech retiree staring at a rollover IRA, the question is the same: How much of your retirement do you want guaranteed, and how much left to chance?

Lyle Boss, The REAL BOSS Financial, a native Utahn and retirement specialist who has spent decades helping families across Utah and the Mountain West build secure, income-focused retirement plans. Boss Financial, 955 Chambers St. Suite 250, Ogden, UT 84403. Telephone: 801-475-9400. https://www.safemoneylyleboss.com/