Key Takeaways: 

• Lump-sum and annuity elections have distinct trade-offs. Annuities provide steady income and reduce investment responsibility, but offer less flexibility and no inflation adjustment. Lump sums give you more control, but they also put more market and withdrawal risk on you.

• Your 401(k) may now need to do more of the heavy lifting. After the freeze, it becomes one of the main sources of future retirement growth. This requires a close review of contributions, matching, catch-up opportunities, and investment choices.

• Pension decisions should be made as part of a holistic retirement plan. These choices should not be made in isolation from your 401(k), Social Security timing, tax picture, healthcare costs, and other savings or income.

Intermountain’s pension freeze changes the way many employees may need to think about retirement. A benefit that once continued building toward the future now has a defined endpoint, which means other parts of your plan may need to carry more of the load. That shift is not just about the pension itself. It also affects how you need to think about your 401(k), Social Security, personal savings, and the bigger picture of how all your retirement income will eventually come together to support your next chapter.

Step 1: Make Sure You Understand What the Intermountain Pension Means

Intermountain has announced that its pension freeze takes effect on December 31, 2026. Earned benefits are not disappearing. What has already been earned under the pension plan remains protected in trust, and eligible participants may continue to earn additional benefits throughout the year.¹

Once the date passes, however, future pension accruals end. At that point, your frozen pension becomes a benefit you’ll need to decide how to take, and you will begin relying fully on the company’s 401(k) program for future employer-sponsored retirement growth.

Lump Sum vs. Annuity: The Main Tradeoffs

From there, one of the biggest decisions is whether to take your benefit as an annuity with steady monthly payments or as a lump sum. The annuity turns the benefit into ongoing pension income, while the lump sum gives you a retirement asset that can be rolled over and managed alongside your other accounts.

The appeal of monthly payments is predictability. The appeal of the lump sum is flexibility. One can help create a dependable income floor, while the other may allow for more control over taxes, investment strategy, withdrawals, inheritance for your heirs and how the money fits into the rest of your plan.

Neither option is automatically better. The right pick comes down to your income needs, your other retirement resources, your comfort with investment risk, and what role you want this benefit to play over time.

Please Note: Intermountain monthly payments are not automatically adjusted for inflation over time, which can reduce real spending power later in retirement. Additionally, once either election is made, and payments or a rollover begin, it is generally irrevocable, which makes thoughtful planning especially important.

Step 2: Review Your Rollover Options Carefully

If you end up making a rollover, it’s important to clearly understand the process before moving any money. A direct rollover is often the most straightforward option because the distribution goes directly to an eligible retirement account. This usually lets the money stay tax deferred and helps you avoid a mandatory withholding upfront.

Rollovers must also be evaluated on their integration with your overall retirement income plan:

• The receiving account should be chosen based on how it affects your full investment mix and long-term withdrawal plan.
• Future withdrawals should be reviewed for how they may affect taxable income and Medicare-related costs.
• Required minimum distributions (RMDs) should be considered now, especially if the rollover adds to tax-deferred balances.
• The rollover should be evaluated based on the role this money is expected to play in retirement.

Please Note: If the distribution is paid to you instead of going directly to an eligible retirement account, there’s a mandatory withholding of 20% of the taxable amount for federal income taxes. You would then need to complete the rollover within 60 days, and if any taxable portion is not rolled over, those under age 59½ may also owe a 10% early distribution tax unless an exception applies.²

Step 3: Make the Most of Your 401(k)

For many people affected by the freeze, the 401(k) becomes one of the main engines of future growth. That is why this account deserves a more deliberate review now, especially in these core areas:

Contribution Type

Intermountain allows pre-tax and Roth 401(k) contributions. That gives you room to think more intentionally about whether you want to reduce taxable income now, build more tax-free money for later, or use both approaches as part of a broader retirement strategy. 

Annual Limits

Contribution limits shape how much you can actually move into the plan each year. That matters more after a pension freeze because the final working years often become your best chance to increase saving rates, and the catch-up rules available after age 50 and for many workers ages 60 through 63 can make those years especially valuable. 

Employer Contributions

Employer dollars can meaningfully increase your long-term balance, but only if you are positioned to receive them. Make sure you are capturing the full match, understand any additional contributions you may now be eligible for, and review vesting schedules so you know how much of those contributions are truly yours over time.

Investment Mix

With the 401(k) taking on a larger role, your investment choices deserve closer attention. You will need to review your available options and build an allocation based on your time horizon, risk tolerance, and how this account fits alongside your other retirement assets.

Step 4: Review Your Social Security Timing and Other Income Sources

Retirement planning should account for all potential income sources, not just your pension and 401(k). One of the most important is Social Security. 

A few Social Security timing points deserve a close look:³

• Your full retirement age depends on when you were born. For many current workers, it falls somewhere between age 66 and 67.
• You can start benefits as early as 62, but starting before full retirement age permanently reduces the monthly amount.
• Waiting past full retirement age can increase your benefit until age 70, with delayed retirement credits adding 8% for each full year you postpone claiming.
• For married couples, filing decisions can affect more than one check. Spousal benefits may be available, and timing can change how much a household receives.
• Medicare timing needs separate attention. If you are not already receiving Social Security, contact the Social Security Administration at least three months before your 65th birthday to enroll and help avoid late penalties.

Understanding Other Retirement Income Sources

Once you account for your Social Security, pension, and 401(k), the next step is understanding how the totality of your income sources will work together. Most retirement plans rely on multiple accounts, and how you withdraw funds significantly impacts your tax burden, financial flexibility, and the longevity of your savings:

Tax-Deferred Accounts

Traditional IRAs and employer-sponsored plans often make up a large share of retirement savings. Withdrawals are taxable and can later be driven by RMDs, which means timing and coordination with other income sources become important.

Roth Accounts

Roth assets can provide flexibility later in retirement since qualified withdrawals are generally tax-free. They can be useful when you want to access funds without increasing taxable income or triggering higher tax brackets.

Taxable Investment Accounts

Brokerage accounts can support early retirement years, help manage income before other benefits begin, and provide flexibility when coordinating withdrawals across different tax treatments.

Cash Reserves

Keeping funds in savings and money market accounts offers a buffer for more immediate needs. These reserves help you avoid selling long-term investments during market dips, which protects and maintains the value of your core retirement assets.

Part-Time Income

Even a modest income stream in the early years of retirement can reduce withdrawal pressure, improve savings outcomes, and create more flexibility around timing decisions.

Step 5: Put Together a Comprehensive Plan for Life After the Freeze

Once you have reviewed the pension decision, the rollover, the 401(k), and Social Security, the next step is seeing how those choices work together. This is where a plan moves beyond separate decisions and starts showing whether it can truly support long-term retirement security.

That broader view helps reveal whether the income plan is efficient, whether risk is concentrated in the wrong places, and whether the strategy still holds up once taxes, timing, healthcare costs, and real spending needs are taken into account.

Model the Main Decisions Together

A helpful plan should compare the decisions that now carry the most weight. That includes modeling monthly pension payments versus a lump sum rollover, testing higher 401(k) contribution rates, capturing the full employer match, and evaluating how a few additional working years may alter the outcome.

When evaluating pension decisions, it’s essential to consider specific risks. Pension payments should be analyzed for inflation risk, as they typically do not have cost-of-living adjustments. Conversely, lump-sum strategies carry sequence of returns risk, where poor early market performance can jeopardize the long-term sustainability of the funds.

A strong comparison should show how these paths perform under pressure. That includes how income is generated, how flexible the plan remains, and how sensitive the strategy is to rises in costs, market performance, and changing spending needs.

Account for Taxes, Healthcare, and Timing

A stronger plan should treat taxes as part of the income strategy from the start. That includes coordinating withdrawals across pre-tax, Roth, and taxable accounts, identifying where partial Roth conversions may reduce future required minimum distributions, and managing income to stay within targeted tax brackets while avoiding medicare costs such as income-related monthly adjustment amount (IRMAA) surcharges.

Similarly, healthcare planning is a critical component of this overall analysis. Those retiring before age 65 will need bridge coverage, which can significantly impact early cash flow. Other important considerations include the strategic use of Health Savings Account (HSA) funds, both before and after age 65, and determining the most effective approach for long-term care needs—whether through insurance, self-funding, or a hybrid strategy.

The key is to take a lifetime view rather than just a year-by-year approach. Proper long-term planning in these areas involves deciding when to recognize income, convert assets, and preserve flexibility so the totals paid across retirement are lower, future RMD pressure is reduced, and health-related costs are kept in check.

Retirement Planning After the Intermountain Pension Freeze FAQs

1. Am I losing what I already earned under the pension?

No. The change affects future accruals, not the pension benefit you have already built. What you have earned remains yours, which makes the planning issue less about loss and more about how to make the most of that benefit going forward.

2. Does a lump sum always make more sense than an annuity?

Not necessarily. The better choice depends on what job you want the pension to do. If you want a stable income floor, an annuity may be more useful. If you want more flexibility over investing, withdrawals, and legacy planning, a lump sum may be worth stronger consideration.

3. What is the biggest rollover mistake people make?

One of the most common mistakes is having the money paid to yourself instead of sending it directly to an eligible account. That can trigger mandatory withholding, create a tight rollover deadline, and increase the risk of otherwise avoidable taxes or penalties.

4. How much should I contribute to my 401(k) now?

That depends on your income, timeline, and the role your 401(k) now needs to play after the pension freeze. At a minimum, many people should make sure they are capturing the full employer match, then evaluate whether higher savings rates and catch-up contributions make sense.

5. Does Peterson Wealth Advisors work with Intermountain employees?

Yes. We are actively helping Intermountain employees navigate this change and get clearer on how the pension freeze affects their retirement planning. That includes helping you think through pension elections, 401(k) strategy, Social Security timing, taxes, and how your overarching financial plan will function across the entirety of your retirement.

We Can Help You Navigate the Intermountain Pension Freeze

The Intermountain pension freeze does not erase what you have earned, but it does raise the stakes on the decisions that come next. The more important question now is how that benefit, along with your 401(k), Social Security, and other assets, will work together to support the retirement you want.

At Peterson Wealth Advisors, we continue to work with Intermountain employees who want clarity on exactly that. Through our Perennial Income Model™, we help clients turn separate accounts and benefits into a coordinated income strategy built around real retirement needs, not rough assumptions.

The freeze deadline is approaching fast. Don’t wait to start planning to bring more clarity to your retirement planning. To learn how we have been helping other Intermountain employees navigate this transition, please schedule a complimentary consultation with our team.

Resources:

1) Intermountain Health Pension Announcement

2) IRS Rollovers

3) Social Security Retirement Benefits

This article reflects the insights and opinions of its author and is not a recommendation or endorsement of their views or services.

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