If you’re approaching retirement and you have a pension, you’ve probably wondered:
“Should I take the pension payout… or would I get more income by moving that lump sum into an annuity?”
This is one of the most common questions retirees bring to me. And the truth is: sometimes the pension is the better deal — but most of the time, today’s private-market annuities pay significantly more.
Let’s break it down clearly and simply so you can compare your options with confidence.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using our annuity calculator.
Pension vs. Annuity: What’s the Real Difference?
A lot of retirees don’t realize:
A pension is an annuity.
Social Security is also an annuity.
They’re all structured the same way — a guaranteed income stream you can’t outlive.
The difference?
Your company’s pension = one option
The private annuity market = thousands of options
That’s why so many retirees reach out to me before they “flip the switch” on their pension. They want to know:
- Is my pension’s payout competitive?
- Is the joint payout for my spouse any good?
- Would a private annuity pay more for the same lump sum?
And the answer, in most cases?
💡 Most pensions today pay much less than a high-quality private annuity.
(But not always — and when your pension is the best option, I’ll tell you.)
👉 Curious what the highest payouts look like? Use an annuity calculator to find out!
Why Annuities Often Pay More Than Pensions
Pensions are disappearing.
Companies are trying to reduce long-term liabilities… not increase them.
Private annuity companies — on the other hand — are competing fiercely for your business.
That’s why private-market annuities often offer:
✔ Higher single-life payouts
✔ Stronger joint payouts
✔ Payments that never decrease
✔ Flexible options for survivors
✔ Bonus features, depending on the product
One retiree I worked with recently had a pension that would pay him $30,000/year on a $450,000 lump sum.
But when we plugged that same $450,000 into the highest-paying private annuity?
He was looking at far more income — often $5,000–$15,000 more per year, depending on joint vs. single options.
💡 Pro Tip: Never annuitize a pension before comparing it to private options.
Once you flip the switch, you can’t undo it.
👉 Want help checking your numbers? Schedule a call
Should You Choose Single or Joint Income?
Here’s how I explain it on calls:
Single-life payout
- Pays the most.
- Stops when you die.
- Your spouse receives nothing except a small death benefit if some money is left over (unless you have other assets to protect them).
Joint-life payout
- Slightly lower payout.
- Continues for your spouse’s lifetime.
- Offers peace of mind if they rely on your income.
If you have life insurance or other assets set aside for your spouse, a single-life payout might make sense.
But for most couples the same age?
💡 A joint payout is usually best — especially when private annuities pay much more than your pension’s joint estimate.
Real Example: $450,000 Pension vs. Private Annuity
Here’s a simplified version of what I often show clients on a Zoom call:
Pension Example (Age 62 / Spouse 62)
- Lump sum value: $450,000
- Pension joint payout: $25,000–$30,000 per year
- Survivor income often reduced by 25%–50%
Private Annuity Example
- Same $450,000
- Joint guaranteed payout after a short deferral: $35,000–$47,000+ per year
- Payments never decrease
- Survivor receives full lifetime payout, not just a fraction
And if you defer 5 years (from 62 to 67)?
Payouts can exceed $46,000+ per year, guaranteed for both lifetimes.
That’s why most people come away thinking:
“Why didn’t anyone ever show me these options?!”
👉 Want to see your exact numbers? Use the calculator at JohnStevenson.com.
The Truth About “Accelerated” Income Riders
If you run numbers on my website, you’ll notice some carriers offer very high payouts… but with a catch.
These are accelerated income riders.
How they work:
- They pay a much higher income for 5–7 years
- Then the income drops by 30% or more
Why would anyone pick this?
Two reasons:
1. They’re retiring early and delaying Social Security
They want high income now, then Social Security fills the gap later.
2. Their health is poor
They may want higher income early in retirement rather than later.
For most retirees, though?
💡 You want the payout that never decreases.
That’s usually the best long-term value.
How a Lump-Sum Pension Transfer Works
Many retirees think moving their pension is complicated — but it’s actually straightforward:
✔ Step 1: You choose a private annuity
✔ Step 2: We submit an application
✔ Step 3: Your pension sends the lump sum directly to the annuity as a rollover
✔ Step 4: Income begins whenever you choose
No taxes.
No penalties.
No stress.
Whether your money is in:
- A pension lump sum
- A 401(k)
- A TSP
- A traditional IRA
- Cash
…I work with all of it.
👉 Not sure what your pension will allow? Book a call and I’ll walk you through it.
Conclusion
For most retirees today:
✔ Private annuities pay more
✔ They offer better joint payouts
✔ Payments never decrease
✔ They provide more control and transparency
But every situation is unique.
Before you lock in a pension, always compare it to private market options.
One small decision here can create $100,000+ in extra lifetime income.
Need help with finding the best annuity for your retirement?
Click here to schedule a call with me.
On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have