Audiobook
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"Be true to yourself and your values."
— Alan Mulally
What factors should you think about, and in what order, so that you can make the best decision? Here is our suggestion of an effective way to proceed. There are five basic steps and questions that will help you through the decision-making process as you evaluate whether to take a lump sum and roll it over into an Individual Retirement Account, or begin taking the monthly payout from your company.
A Note on RMD Rules (2026 Update)
When the original edition of this book was written, you didn't have to take any money out of an IRA until age 70½. That rule has changed twice since then. Under the SECURE Act of 2019 and SECURE 2.0 of 2022, required minimum distributions (RMDs) now begin at age 73 for those who turn 72 between 2023 and 2032, and at age 75 for those who turn 74 after December 31, 2032.
The Five Fundamental Questions
Need Income?
Responsible?
Trust Advisor?
Family Impact?
Health Status?
#1: Do I Need the Additional Income?
Like the hypothetical example of Ron and Kathy in the previous chapter, question number one is a great place to start. If you do not need this money, or maybe you need only a portion of the monthly income your pension would provide, then it presents a wonderful opportunity to pass money on to your children — though, as we discussed in Chapter 3, the SECURE Act's 10-year rule has changed how that inheritance plays out tax-wise.
If You Don't Need the Income
Roll the money over. Or split it into two buckets: one generating income, the other focused on long-term growth.
If You Absolutely Need Maximum Income
That may sway your decision toward the monthly payments for their guaranteed, predictable payout.
#2: Am I Responsible With Money?
The second question you should ask yourself — and answer honestly — is: am I responsible with money? For most autoworkers, the answer is yes. You've worked long and hard and been loyal to your company for years, possibly decades. Most retirees who have put in that level of effort to accumulate a six- or seven-figure portfolio understand the value of a dollar. They understand retirement is not the time to take big risks. They saw firsthand how devastating a recession can be; they've watched colleagues struggle through 2008, the pandemic crash of 2020, and the brutal 2022 bear market.
But you still must ask yourself this question and be honest. You need to make sure you're responsible with money and disciplined enough to follow through on your financial plan, long term.
The Danger of Overspending
Let's say you roll the money over and decide that a 4% annual withdrawal rate is appropriate. Then you start spending wildly — buying that Corvette, a cottage up north, a vacation home in Florida, helping the kids out with their bills. Your advisor warns you that you're way over budget, but it's your money, and they cannot stop you from spending it.
Money that was supposed to last a lifetime can quickly disappear.
#3: Can I Trust Someone to Invest My Money?
Next, you should ask yourself: can I trust someone to invest my money to generate income and preserve principal?
This may not be true for everybody, but most people are much better off working with a financial advisor than attempting to navigate the ups and downs of the investment process themselves. The most recent edition of DALBAR's Quantitative Analysis of Investor Behavior (QAIB) study — now in its 32nd year, with data through December 31, 2025 — continues to confirm what every previous edition has shown: humans make for terrible investors.
2026 DALBAR Report Findings
4.47%
Average investor annual return (20-year)
Barely outpaced 2.56% inflation
8.62%
Annual gap vs. S&P 500 (10-year)
Investors: 6.20% vs S&P 500: 14.82%
Why such a gap? Because at times of stress in the markets, we act emotionally and irrationally. At times of euphoria in the markets, we also act emotionally and irrationally.
The Most Striking 2026 Finding
In 2025, the S&P 500 returned 17.88% — a third consecutive year of double-digit gains. And yet, investors withdrew 6.91% of equity fund assets — the largest withdrawal rate in the 41 years DALBAR has tracked this data. More than $1 trillion flowed out of equity funds in a year when the market gained nearly 18%.
DALBAR also tracks the “Guess Right Ratio” — how often investors correctly anticipate market direction. In 2025, investors guessed right just 3 out of 12 months— a 25% success rate, tying for the worst in DALBAR's recorded history.
A Modern Caution: Be Wary of “Free” Advice
Today's retirees are inundated with TikTok finance influencers, YouTube “experts,” subreddit communities, AI chatbots, and one-size-fits-all robo-advisors. Some of this content is genuinely good. Most of it is not. And none of it knows you— your pension election deadline, your spouse's health, your tax situation, the specific rules of your Big Three plan, or what you'll regret in 15 years.
Use these tools to learn, not to decide. A general-purpose AI can summarize the SECURE Act in 30 seconds. It cannot tell you whether to take the lump sum or the monthly pension at GM.
The Reality of Loss
One thing we like to say at our firm is that the market can drop 10–20% at any time, for no reason whatsoever.And it does — regularly. We've seen corrections in back to back years in 2025 and 2026. The 2022 bear market (when the S&P 500 fell more than 18% and the Bloomberg Aggregate Bond Index dropped more than 13% — the worst combined year for stocks and bonds in modern memory), the 2020 pandemic, the corrections of 2018, 2015, 2011, and 2008 — they all happened. They will all happen again.
It can be gut-wrenching to see your nest-egg drop 10% — or even 5%. That's why most people are better off working with someone who can coach them through turbulent times. Or, if you're the type who would fire an advisor over a small loss, maybe you're better off taking the monthly payouts and letting the company take the investment risk.
If you accept the premise that most people are better off working with a financial advisor, and you believe that applies to you, then you need to identify someone you can trust. We'll discuss how to find that person in Chapter 8.
#4: How Will This Decision Affect My Family?
When you pass on, is it going to hurt your children that — because you took a monthly payout, and now those payments have ended — you are unable to leave them anything? Especially if you had wanted to leave something to the kids and grandkids, or to a charity you've supported your whole life?
On the other hand, what if you opt to take the lump sum, but you spend it wildly or invest it poorly, and you run out of money in retirement? That will certainly affect your loved ones, because now they must bail out Mom and Dad.
Don't Forget the SECURE Act's 10-Year Rule
Under the SECURE Act's 10-year rule, the math of leaving a large pre-tax IRA to your adult children has shifted meaningfully. They'll be required to drain the account within a decade — often during their highest-earning years, often pushing them into higher tax brackets.
This isn't a reason to avoid the lump sum, but it is a reason to plan around it: Roth conversions during your lifetime, life insurance for tax-free inheritance, and strategic beneficiary planning all become more valuable in the post-SECURE Act world.
#5: How Is My Health (and My Spouse's Health)?
As we discussed in Chapter 1, longevity continues to increase on average — even after the temporary disruptions caused by COVID-19. Companies use the law of large numbers and can predict the average longevity of their retirees with remarkable accuracy.
The only advantage you may have over them is insider information on your health. If you know — or at least believe — that you have some sort of health condition that will prevent you from meeting your life expectancy, it may be in your best interest to take the lump sum. If something happens to you, the lump sum lives on. It either supports your spouse, transfers to your children, or passes on to another beneficiary.
But you may also have to consider your spouse, and it may be wise to take the monthly payments even if you are in poor health, since you can elect a survivor option.
The Five Questions, Reviewed
For some of these questions, it can be tremendously helpful to get outside input from a financial professional who customarily works with retirees — someone you feel comfortable with, and who will provide you with truthful answers and honest input.
Do I need the additional income?
Am I responsible with money?
Can I trust someone to invest my money to generate income and preserve principal?
When I die, how will this decision affect those I love?
How is my health (and my spouse's health)?
As you consider what to do in working through whether to choose the lump sum or the monthly payments for life, the answers to these questions will help guide your decision.