Pension Lump Sum vs Annuity Calculator
Take the cash or the monthly pension?
Enter your values
Enter the lump sum offered in $.
Enter the monthly pension in $.
Enter the your age in yr.
Enter the life expectancy in yr.
Enter the return you expect on the lump sum in %.
Enter the survivor benefit in %.
Results update instantly as you type — no submit needed. Your values are remembered on this device, and the shareable link reopens the calculator with exactly these numbers.
- Present value of the pension
- $374,539.46
- Better option
- Take the lump sum
- Advantage
- $45,460.54
- Implied payout rate
- 6.57%
- Total pension payments to life expectancy
- $690,000.00
- Monthly income the lump sum supports at 4%
- $1,400.00
Quick answer
Compare the pension's implied payout rate (annual income ÷ lump sum) with the income you could safely draw from the cash invested yourself.
Payout rate = annual pension ÷ lump sum offered
At a glance
| What it does | Take the cash or the monthly pension? |
|---|---|
| Category | Finance |
| Inputs needed | Lump sum offered, Monthly pension, Your age, Life expectancy, Return you expect on the lump sum, Survivor benefit |
| Main output | Present value of the pension |
| Formula | Payout rate = annual pension ÷ lump sum offered |
| Cost | Free — no sign-up, no download |
How to use the Pension Lump Sum vs Annuity Calculator
- 1Enter the lump sum your plan is offering.
- 2Enter the monthly pension you would give up.
- 3Set a realistic return and life expectancy for the comparison.
Inputs explained
- Lump sum offered($)
- Enter the lump sum offered in $.
- Monthly pension($)
- Enter the monthly pension in $.
- Your age(yr)
- Enter the your age in yr.
- Life expectancy(yr)
- Enter the life expectancy in yr.
- Return you expect on the lump sum(%)
- Enter the return you expect on the lump sum in %.
- Survivor benefit(%)
- Enter the survivor benefit in %.
Worked example
Using the values the calculator loads with:
Inputs
- Lump sum offered420000 $
- Monthly pension2300 $
- Your age62 yr
- Life expectancy87 yr
- Return you expect on the lump sum5.5 %
- Survivor benefit50 %
Results
- Present value of the pension$374,539.46
- Better optionTake the lump sum
- Advantage$45,460.54
- Implied payout rate6.57%
- Total pension payments to life expectancy$690,000.00
- Monthly income the lump sum supports at 4%$1,400.00
Frequently asked questions
What payout rate is good?
Above roughly 6% the pension is usually hard to beat by investing; below 5% the lump sum often wins, especially if you want to leave an inheritance.
What about inflation?
Most private pensions are not indexed, so their real value falls each year. Reduce the monthly figure or raise your required return to reflect that.
What do I need to enter into the Pension Lump Sum vs Annuity Calculator?
Just 6 values: lump sum offered, monthly pension, your age, life expectancy, return you expect on the lump sum, survivor benefit. Every field starts with a realistic example, so you can change one number at a time and watch the result update instantly.
How does the Pension Lump Sum vs Annuity Calculator work out the answer?
Compare the pension's implied payout rate (annual income ÷ lump sum) with the income you could safely draw from the cash invested yourself. It applies the formula Payout rate = annual pension ÷ lump sum offered and shows the working so you can check each step by hand.
Is the Pension Lump Sum vs Annuity Calculator free, and do I need an account?
It is completely free with no sign-up, no download and no usage limit. Everything is calculated in your browser, so the numbers you type never leave your device.
Results are estimates for general information. For medical, legal, structural or financial decisions, confirm with a qualified professional.