For many older Ohioans, pensions once symbolized financial security—the promise of a lifetime of steady income. But as rules shift and companies reorganize, that commitment becomes more complicated. From misleading payment options to tax confusion, retirees across the state are discovering that their pensions aren’t as simple or secure as they seem. Here are seven pension traps Ohio seniors often fall into and how to avoid them.
1. Pay it all in one lump sum without planning
Many pension providers in Ohio now offer retirees an attractive option: a one-time lump sum payment or lifetime monthly payments. While a lump sum may sound attractive, it often results in rapid depletion if not managed wisely. The Ohio Public Employees Retirement System (OPERS) warns that taking a lump sum transfers investment risk entirely to you. Once it’s gone, it’s gone. Without a long-term withdrawal strategy or professional advice, retirees may run out of money years earlier than expected.
2. Ignoring survivor benefit options
One major pitfall is failing to protect your spouse’s income after his or her death. The Ohio State Teachers’ Retirement System (STRS) notes that many retirees choose the highest-paying “single life” pensions to maximize their income, only to leave their surviving spouse with nothing. Joint and survivorship plans now pay slightly less but ensure your partner continues to benefit. This is one of the most overlooked and painful mistakes Ohio retirees make.
3. Ignore state and federal tax differences
Ohio exempts some pension income, but not all. The Ohio Department of Revenue confirmed that while some public pensions are partially tax-exempt, others are still subject to tax at the state and federal levels. Many retirees forget to adjust their withholding accordingly, resulting in an unexpected tax bill each spring. A tax professional familiar with Ohio’s specific pension rules can help optimize tax withholding and avoid penalties.
4. Does not take inflation into account over time
Most Ohio pension systems do not automatically increase payments with inflation. Retirees receiving fixed pensions may lose purchasing power. Without cost-of-living adjustments (COLA), today’s comfortable income may feel tight ten years from now. Supplementing your pension through savings or inflation-protected investments can help maintain your standard of living.
5. Understand the changes under the new Social Security Equity Act
Recent updates through the Social Security Equity Act Windfall Elimination Provision (WEP) eliminated and Government Pension Offset (GPO)— Two previous provisions reduced Social Security benefits for public employees receiving pensions. The change means Ohio retirees working in the public and private sectors can now receive full Social Security benefits without offsets. However, benefit calculations may still take time to update, and retirees should verify their records with the Social Security Administration (SSA). Understanding how your pension and Social Security now work together can ensure you don’t miss out on the income you deserve.
6. Missed benefit change deadlines
Ohio’s pension system has strict deadlines for switching payment methods or updating beneficiaries. Once benefits begin, most elections are irreversible. Retirees should review their options carefully and update them before their retirement date is finalized. Failure to meet deadlines may lead you to make a decision that no longer suits your needs, especially if family or health circumstances change.
7. Not seeking professional guidance early enough
Pensions decisions are one of the most lasting financial choices you will make. Yet many Ohio seniors rely on hearsay or online calculators rather than expert advice. A certified financial planner familiar with Ohio’s retirement system can model tax consequences, survivor benefits and long-term growth options. The right strategy can turn a limited pension into a sustainable source of income. Without help, even smart retirees may be at risk of wasting their money.
Pensions are a tool, not a guarantee
Ohio’s pensions remain strong, but they need to be managed carefully. Understanding payment structures, tax rules and survivorship options can mean the difference between financial relief and regret. Don’t just collect your pension – manage it too.
Are you part of the Ohio Pension System? Share your experiences or lessons learned in the comments to help others avoid the same pitfalls.
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Teri Monroe began her career in communications working for local government and non-profit organizations. Today, she is a freelance financial and lifestyle writer and small business owner. In her spare time, she enjoys golfing with her husband, taking long walks with her dog Milo, and playing pickle ball with friends.
