Pensions typically pay a % of FINAL EARNINGS times YEARS OF SERVICE.

For example: Say you are 50 years old, have 15 years of service, and would get $10,000 a year at age 65 if you leave today.

But if you stay:

• You would have more YEARS OF SERVICE – twice as many if you stay to age 65.
• Your FINAL EARNINGS should be higher, even if only due to inflation.  If your earnings rise 4% a year, your final earnings at age 65 would be 80% higher.

What you would get at age 65 if you stay

The default payout from an employer pension plan is a lifetime income with a 50% survivor benefit – if married, your spouse would get a survivor benefit equal to half your pension if you die first.

• Should you give up the survivor benefit? If you do, you’d get a higher pension as long as you live.  But would your spouse be OK?  A surviving spouse generally needs about 70% of your income as a couple and keeps the higher of your two Social Security benefits.  In most cases, your spouse would need the survivor benefit to hit that 70% target.
• Should you cash in your benefit? Many employers now allow you to take a lump sum instead of the monthly lifetime income.  The pile of money often looks large.  But before you grab the cash, make sure your income needs are met. Our Figure Out How to Get Income from Retirement Savings is a reasonable place to start.

Most private employer pensions are not inflation-proof.  And that’s a big problem down the road.  If prices rise 3 percent a year, in twenty years your pension will buy barely half what it buys today.  And if your survivor will get just half that pension, your survivor will be able buy barely a quarter of what your pension buys today.