Question: I’m 60 and want to retire in February 2026. On my first pension, I make roughly $62,000 a year before taxes. For my second pension, I’m looking at making around $21,000 a year before taxes. When I retire in 2026, the current pension program will also allow me to take a lump sum of over $101,000. I would like to reinvest to avoid paying taxes. Also, I should make around $30,000 in Social Security. All told, I’m looking at roughly $113,096 a year from both pensions and Social Security.
Should I pull my Social Security early to help bridge the gap from the pensions to what I am making now? Right now with full employment and one pension, I’m making roughly $200,000 a year. I have one mortgage on a second home that is $2,400 a month and no credit card debt. What kind of financial adviser should I be looking for to help with this? (Looking for a new financial adviser? This free tool can match you to an adviser who might meet your needs.)
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Answer: Let’s tackle these questions one by one, starting with the Social Security question. Broadly, most advisers agree that it’s not usually recommended to start Social Security prior to full retirement age. “Waiting until FRA is better and in some planning instances, delaying until after 70 may make sense to receive 8% delay credit increases,” says Grace Yung, a certified financial planner (CFP) at Midtown Financial Group. “With Social Security planning, there are many opportunities and strategies one can employ to help maximize cash flow, depending on one’s marital status, whether they’re a widow or divorced.”
Marguerita Cheng, a CFP at Blue Ocean Global Wealth adds: “The decision when to take Social Security is very personal. Social Security isn’t simply a monthly check, it provides inflation-adjusted lifetime income for you and your spouse.”
That said, there are other Social Security issues to consider, Cheng says. “While some government pensions do not affect your individual Social Security benefit amount when you apply on your own record, it’s also important to determine if your Social Security benefits would be affected by government pension offset (GPO),” says Cheng.
In your case, there are a lot of questions you’ll need to take into account, even beyond Social Security claiming. When it comes to comprehensive planning questions, Andrea Clark a CFP at The Table Financial Planning, says it depends on various personal factors. “Are all these inflation-adjusted pensions or fixed? What tax bracket will you be in when you retire? Do you have a spouse or partner who will be relying on this income? Do you have other invested assets to bridge the gap to a later Social Security claiming age? Will you keep both houses throughout retirement or will you eventually sell one that can become more liquid assets? Are you in good health? Do you have legacy goals?” Clark says.
Other things you may want to ask yourself include questions about your health, family history, your spouse’s earning history and benefit among, adds Ryan Townsley, a CFP at Town Capital. “These are all factors that should go into the equation to determine what age to file. You should also look at your philosophy on retirement spending,” Townsley says. “Do you want to spend more in the early years and decrease as you age, known as a front-loaded plan, which is very popular but not for everyone — or maintain an inflation adjusted level income for life?”
To achieve the best possible outcome, considering spousal or beneficiary protection is crucial, says AJ Vignola, a CFP at King Financial Network. “It’s essential to analyze all pension options, including spousal benefits, to ensure your loved ones are secure in any eventuality,” Vignola says. “Tailoring these decisions to your unique situation will provide peace of mind for both you and your beneficiaries.”
You have two strong legs to stand on, your Social Security and multiple pensions, but you have one weak leg too — your seemingly small amount of retirement savings. “If your three structured cash flows are inflation-indexed, it makes your plan more realistic, but I’m very concerned about your apparent inability to save, despite a $200,000 annual income,” says Jim Hemphill, a CFP at TGS Financial Advisors.
For this reason, Hemphill recommends a Monte Carlo analysis to examine a large number of randomized scenarios to determine the likelihood you might run out of money in retirement. “This analysis should help you decide whether your plan has a necessary margin of safety. Retiring at 62, you may well spend 30 years in retirement. You still have a mortgage balance and if you start collecting Social Security at 62, you can’t earn more than $20,000 of income per year without taking a haircut on your Social Security benefit,” says Hemphill.
You mention pension lump sum distributions, which can typically be made via a direct rollover. “A direct rollover allows the participant to move funds into an individual retirement account (IRA). A direct rollover is a non-taxable event and allows the participant to maintain tax deferred growth. Within the IRA, the participant will have the flexibility to invest the proceeds based on their investment objectives and risk tolerance,” says Vignola. Again, it’s important to analyze all pension options before electing to take the lump sum.
Should you get a financial planner and what kind of planner is right for you?
Working with a CFP who is also a retirement income certified professional (RICP) with experience and expertise in retirement income can help you evaluate your options, pros say. (Looking for a new financial adviser? This free tool can match you to an adviser who might meet your needs.)
“I recommend checking the CFP Board website to find someone who specializes in late career and retiree clients. They will be able to help you assess the pros and cons of taking an annuity payment versus a lump sum from your pension plan,” says Alison James, a CFP at WorthWise Financial Partners. Ask for references of people who have retired successfully using this planner, and be sure to ask anyone you might hire these 15 questions.
“Look for someone who offers a holistic approach, considering all aspects of your financial landscape,” adds Vignola. “This will ensure personalized advice that aligns with your specific goals, including retirement planning, investment strategies, insurance, tax and estate planning.”
Specifically, a fee-only financial planner would be best equipped to help you navigate the decisions you’re facing. The reason hiring a fee-only planner is beneficial is that they’re only paid by the client and they don’t receive commissions or payments for recommending or selling financial products, which limits the possibility of conflicts of interest.
Should you decide to work with a CFP, know that in order to earn their designation, they will have completed exhaustive education requirements along with thousands of hours or work-related experience in addition to being held to a fiduciary duty. This means they’re required to put their client’s best interests ahead of their own which also minimizes conflicts of interest in terms of compensation.
Similarly, Chartered Retirement Plan Counselors (CRPC) complete rigorous coursework and must pass an exam to earn their certification from the College for Financial Planning.
Know, too, that if you delay starting Social Security past full retirement age, your benefits increase 8% per year up to age 70. “A financial planner can help you calculate whether delaying or initiating payments is better for you. It will be important to consider your views on risk and market volatility to ensure you choose a path that provides adequate returns and also allows you to sleep soundly at night,” says James.
The best places to look for a planner who fits the bill are websites like the National Association of Personal Financial Advisors (NAPFA) or XY Planning Network, pros say. “Many comprehensive financial planners work with clients virtually and if you’re comfortable with that, you’re likely to find a CFP who specializes in your particular pension details,” says Clark.
Have an issue with your financial adviser or looking for a new one? Email questions or concerns to [email protected].
Questions edited for brevity and clarity.