Navigating Your Pension and Retirement Plan Decisions

Decades of service have built something significant. The decisions you make at retirement-how to receive that income, when to act, and how to coordinate it with the rest of your financial picture-will shape the quality of your retirement for years to come.

Wilkerson Advisory Group guides employees through the complexity of pension elections, lump sum decisions, and defined contribution planning. We understand the specific plans common to Columbia, Missouri and the surrounding region-and we regularly work with HR departments to assist with questions that HR may never think to ask..

Understanding Pension Plans

A pension plan-formally called a defined benefit plan-provides a guaranteed monthly income in retirement, calculated by a formula that considers your years of service, your salary history, and other variables specific to your employer's plan.

Unlike a 401(k) or 403(b), the investment risk in a pension sits with the employer, not the employee. Your benefit is defined in advance. The complexity lies in how you choose to receive it.

• 401(k) Rollovers & IRA Consolidation – Simplify and optimize your retirement accounts to align with your income needs and investment goals.

• Pension Maximization – Make informed decisions about lump-sum vs. monthly pension options, from advisors with experience guiding University of Missouri and Boone Hospital employees.

• Social Security Optimization – Coordinate Social Security timing with your overall retirement plan to optimize lifetime benefits.

• Medicare Coordination – Integrate Medicare decisions with healthcare and long-term care planning to help preserve wealth and reduce surprises.

• Tax-Efficient Withdrawal Planning – Plan income distributions across taxable, tax-deferred, and tax-free accounts to help minimize your lifetime tax burden.

Most employees receive a summary of their pension options in a packet from HR. What they rarely receive is a comprehensive analysis of what each option actually means for their retirement income, their estate, and their tax picture.

- Carroll Wilkerson, CFP® - Founder, Wilkerson Advisory Group

Potentially creating tabs within this page so you can sort through UM System/Public Schools/State & Gov employees/Social Security and then go to 401k and so on. Verses just being one long page to scroll through. 

UM System Retirement Plans

The University of Missouri System has employed multiple retirement structures over the years. Where you fall in that history determines what options are available to you-and what decisions may be time-sensitive.

Legacy Pension Plan (Defined Benefit)

Employees who enrolled prior to certain UM System cutoff dates may be in the Legacy Pension Plan-a traditional defined benefit structure. At retirement, this plan offers more than 50 election options, including:

• Single life annuity - maximum monthly payment, ends at your death

• Joint and survivor annuity - reduced payment, continues to spouse after death

• Survivor benefit percentage elections (50%, 75%, 100%)

• Lump sum and annuity combination - a partial lump sum paired with a reduced ongoing benefit

• Full lump sum payout (currently available under a time-limited offer - see deadline above)

The annual benefit under the Legacy Plan is generally estimated using a standard formula: approximately 2% multiplied by years of service, multiplied by the average of your three highest salary years. That number represents a single life annuity baseline-every other election adjusts from there.

Critical consideration: pension benefits that end at your death do not transfer to heirs. Estate planning implications must be factored into your election decision alongside income needs.

Legacy / Hybrid Transition Plan

Some UM System employees were enrolled in a hybrid model that blends defined benefit and defined contribution elements. Employees in this structure may have access to:

• A partial defined benefit (pension) component

• A defined contribution component with investment flexibility

• In certain cases, the ability to elect a full lump sum and transition to the current defined contribution plan

The interaction between these components and your specific enrollment date determines the right approach-and this is where personalized analysis becomes essential.

Current Defined Contribution Plan (New Hires)

Employees hired after the UM System transitioned away from the Legacy Plan are enrolled in the defined contribution structure, administered through Fidelity. Key features include:

• Required employee contribution of 2% of salary

• Employer match ranging from 2% up to 8%, depending on contribution level

• Investment flexibility within Fidelity's plan menu

• Portable account balance-assets transfer with you

While this plan does not provide guaranteed monthly income like a pension, it provides flexibility and estate-transfer advantages that defined benefit plans typically do not.

Pension Plans Common to the Columbia Region

Beyond the UM System, Wilkerson Advisory Group regularly works with employees of institutions that maintain defined benefit structures:

Missouri Public School Teachers

Missouri public school teachers participate in the Public School Retirement System (PSRS) rather than Social Security. A significant portion of salary is directed into this pension system each pay period-meaning Social Security benefits may be limited or absent at retirement.

Key considerations for teacher pension planning:

• PSRS provides a formula-based monthly benefit that may compare favorably to Social Security for long-tenured educators

• Lump sum options are often less favorable in teacher plans than in UM System plans-monthly income is typically the stronger choice

• Social Security income gaps must be planned around, particularly in early retirement years

• Spousal Social Security benefits and survivor election strategies require careful coordination

State Employees & Government Workers

Missouri state employees, Boone County workers, and other government agency employees often maintain defined benefit plans through the Missouri State Employees' Retirement System (MOSERS) or similar structures. These plans involve their own election frameworks, survivor benefit options, and lump sum considerations.

Military retirees and federal employees (FERS/CSRS) navigating Missouri residency also bring unique pension coordination needs that intersect with Social Security timing and tax planning.

Lump Sum vs. Monthly Annuity: The Decision That Defines Retirement

No pension decision is more consequential-or more personal-than whether to take a monthly annuity or a lump sum. There is no universal right answer. The right answer depends on your health, your estate goals, your other income sources, and what rate of return you would need to replicate the annuity income through investments.

Our team evaluates these scenarios using personalized modeling that accounts for your full financial picture: other income sources (Social Security, deferred compensation, investments), projected expenses, health and longevity considerations, spousal income and survivor needs, and tax implications of each structure.

A commonly referenced benchmark: to match the income equivalent of a typical monthly pension annuity through investments, a lump sum portfolio generally needs to generate approximately 7–8% annually. Whether that target is realistic-and how much risk is acceptable in pursuing it-is central to the analysis.

This is a general illustrative estimate and not guaranteed, returns are dependent on market conditions, risk, and time horizon. 

Social Security as Part of the Picture

Social Security is, in essence, another defined benefit plan-and one that requires its own strategic timing decisions. For employees who have paid into Social Security throughout their careers, benefit projections are available at SSA.gov and factor significantly into retirement income design.

For educators and certain public employees who did not pay into Social Security, this income source may be reduced or unavailable-making the pension election decision even more consequential.

The interaction between pension income, Social Security timing, Medicare enrollment, and tax planning creates a layered decision set that benefits from coordinated professional guidance.

Defined Contribution Plans: 401(k), 403(b), 457, and More

For employees whose primary retirement vehicle is a defined contribution plan-rather than a pension-the questions shift from election options to accumulation strategy, distribution sequencing, and rollover decisions.

What Defined Contribution Plans Share

• Most employer plans include a matching contribution-always contribute at minimum to capture the full match

• Investment options are selected from a plan menu; institutional-quality options vary by employer

• Account balance is portable-rollovers to an IRA at retirement are common and often strategically advantageous

• Distributions are taxable as ordinary income; sequencing matters for tax efficiency

Specialized Plan Structures We Work With

Our team has experience with a range of plan types beyond standard 401(k) accounts, including:

• 403(b) plans - common among educators, hospital employees, and nonprofit workers

• 457(b) plans - deferred compensation structures for government and some nonprofit employees

• ESOPs (Employee Stock Ownership Plans) - company stock concentration risk and diversification strategy

• Cash balance plans - hybrid structures that look like a defined benefit but function more like a portable account

• Non-qualified deferred compensation arrangements - executive plans with distinct tax and distribution rules

How We Approach Pension and Retirement Plan Decisions

Our process is structured, personalized, and comprehensive. We don't provide generic recommendations-we model your specific situation.