A traditional defined benefit pension generally promises a benefit calculated under the plan’s formula, often paid as monthly income for life. A 401(k) is generally an individual account whose value depends on contributions and investment results. The amount you can withdraw from a 401(k) depends on its balance. [1]

Your pension plan determines the benefits and payment forms available to you. Request a current estimate and the plan documents rather than assuming your options will match those offered by another employer. [1, 2]

Your plan may offer different start dates, with different monthly amounts at each date. An earlier start may provide more years of payments, while a later start may provide a higher monthly payment. The plan’s formula and any early-retirement reductions determine the actual figures. [2]

Compare the income you would give up while waiting with the additional income you would receive later. Your retirement date and pension start date do not necessarily need to be the same, but your plan’s rules control what is available. [2]

Not necessarily. A single-life payment may offer the highest monthly amount while you are alive, but it may stop at your death. An option that continues payments to a spouse or beneficiary will generally have a lower initial monthly amount. [3]

The choice depends on other income available to the household, how much your spouse relies on the pension, your respective ages and health, and the assets that could support a survivor. Compare the household’s income after either spouse dies, not just the first month of retirement.

A single-life pension generally pays you for as long as you live and stops when you die. It can offer a higher monthly amount than an option with survivor protection, but it does not provide continuing payments to a spouse or other beneficiary under that payment form. [3]

Before choosing it, consider whether a surviving spouse could meet expenses with Social Security, their own pension, investments, or other resources. The larger initial payment should be evaluated alongside the income that would disappear at death.

A joint-and-survivor option generally pays you for life and continues a specified portion of the pension to your designated survivor after your death. Plans may offer different continuation percentages, such as 50%, 75%, or 100%. A greater survivor benefit generally reduces the amount paid while both people are alive. [3]

Read the specific terms. Some options continue the reduced payment even if the beneficiary dies first; others may include a “pop-up” feature that increases your payment in that situation. Do not assume every plan treats the survivor option the same way. [3]

A period-certain option may promise that payments continue for at least a stated number of years. If you die during that period, a beneficiary receives the remaining scheduled payments; if you live beyond it, payments generally continue for your lifetime under a life-with-period-certain option. [3]

A refund feature generally provides a specified remaining value to a beneficiary if you die before receiving a certain amount under the plan’s terms. The exact calculation and form of payment vary. Ask the administrator for a written explanation of what is guaranteed, who receives it, and when the guarantee ends. [3, 4]

If your plan offers a lump sum, it gives you control over how the money is invested and withdrawn. It also transfers responsibility for investment results and the risk of outliving the money to you. A lifetime monthly pension provides a defined payment stream under the plan’s terms, but typically gives you less control over the underlying assets. [5]

Compare the lump sum with the available monthly options using realistic assumptions about spending, investment risk, longevity, survivor income, and inflation. A large lump-sum figure is not automatically worth more than lifetime payments. [5]

An eligible lump-sum distribution from a qualified pension plan can generally be moved by direct rollover to an eligible retirement account, such as a traditional IRA. A properly completed direct rollover generally defers income tax until the money is later withdrawn. [6]

Not every pension payment is eligible for rollover. Regular lifetime payments and certain long-term payment series generally cannot be rolled over. Confirm the available distribution and rollover choices with the plan administrator before electing a payment form. [6]

Payments from a qualified pension are generally taxable as ordinary income to the extent they were funded with money that has not already been taxed. If you made after-tax contributions, part of each payment may represent a tax-free return of that amount under the applicable calculation method. [7]

A lump sum paid directly to you can have a different immediate tax and withholding result from a direct rollover. Review both federal and state taxes when comparing options and deciding when to begin payments. [6, 7]

That depends on the plan. Some pensions offer cost-of-living adjustments; others pay a fixed amount. If payments stay level, their purchasing power can decline over a long retirement even though the dollar amount does not change. [2]

Ask whether increases are automatic, discretionary, capped, or available only through a separate option. Then consider how Social Security, investments, or other income could help meet rising expenses.

The answer depends on the type of plan and its sponsor. The Pension Benefit Guaranty Corporation (PBGC) insures many private-sector defined benefit plans, subject to legal limits and exceptions. It does not insure federal, state, or local government pensions or 401(k) account balances. [8]

Review your plan’s information and ask the administrator how the benefit is funded and protected. Do not assume that “guaranteed” means every feature, increase, or payment amount is protected in every circumstance. [8]

Do not assume so. Payment-form elections can become difficult or impossible to change after payments begin. A married participant in a qualified defined benefit plan is generally entitled to a qualified joint-and-survivor form unless the participant and spouse make a valid election to waive it. [9]

Before signing, confirm the start date, payment amount, survivor percentage, beneficiary, and what happens if either person dies first. Ask the administrator to explain any feature you do not understand in writing. [9]