Pension vs Lump Sum Calculator

Decide between a lifetime pension and a lump sum by comparing their value in today’s dollars.

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Amounts in dollars.
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Better value
Present value of the pension
Lump sum
Return needed for the lump sum to match
Total pension payments
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Comparing a Pension With a Lump Sum

Pension value today = Σ monthly payment ÷ (1 + r)ᵐ over the years you expect to collect

The break-even return is the rate at which the lump sum could fund the same payments. If you don’t expect to beat that rate safely, the pension is the better deal.

Worked Example

Tips

The pension protects you if you live longer than expected, and many are backed by the PBGC. A lump sum can be left to heirs and invested flexibly. Survivor options, taxes (roll over to an IRA to defer) and your health all matter. Consider a fee-only fiduciary adviser.