Pension vs lump sum
calculator.
Your pension is offering a lump-sum buyout. Which is worth more? Enter the amounts and see the break-even age, what you would need to earn on the lump sum to match, and how survivor benefits change the math.
The question it answersShould I take the pension annuity or the lump-sum buyout?
Rules: United States. Privacy: runs in your browser. What you enter stays on your device unless you copy a share link, which puts your inputs in the link.
Note: pensions carry implicit longevity insurance that a lump sum does not. If you live to 95, the pension wins by a lot. If you die at 70, the lump sum wins by a lot. Pick based on health, family history, and risk tolerance, not just the break-even number. verify×DON'T TRUST, VERIFYClaim: Average US life expectancy at age 65 is roughly 18-21 additional years; individual variation is significant based on health and family history.Verify at: SSA period life tables ↗ Source 1 in the list belowDefault life expectancy of 85 in this tool is a common planning baseline; adjust for your situation.
Projection, not a promise. The result follows the assumptions you enter. Real results will differ, sometimes by a lot.
What this tool assumes
- Pension internal rate of return assumes you live to your life expectancy.
- Monthly pension, lump sum and current age must be filled in, and none can be negative. If one is blank or negative, the tool shows a prompt instead of a result. A blank survivor years or investment return counts as 0, and the result says so.
- Life expectancy must be above your current age, and the slider tops out at 100. If it is not above, the tool shows a prompt instead of a result.
- Current age and survivor years count in whole years. A decimal is rounded, a negative survivor figure counts as 0, and the result says so above the answer.
- Pension and survivor payments are flat (no cost-of-living raises). The required return and the chart count them once a year, at year end. The break-even age treats them as paid evenly through the year, so it can fall between birthdays; it is rounded up to the next tenth of a year.
- Survivor years appear in the chart only when the survivor payment is above $0.
- Required return is searched between -99% and 30% a year. Below 0% means the lump sum covers every payment even while losing money. Within 0.05% of zero it shows as about 0%.
- Lump sum growth in the chart uses the investment return rate you enter.
Not financial advice. Before electing, check the plan's lump-sum election notice for the interest rate and mortality table used to set the offer.
HOW THIS IS CALCULATED
This tool runs entirely in your browser: no data is sent to any server. It uses only the numbers you enter:
- Years of pension = life expectancy − current age, in whole years (current age and survivor years are rounded, and the result notes it). A blank or negative monthly pension, lump sum or current age shows a prompt instead of a result, as does a life expectancy at or below current age (the slider stops at 100). A blank survivor years or investment return counts as 0, and the result notes it. Annual pension = monthly × 12. Survivor payment = survivor % × annual pension, paid for the extra years you enter.
- Break-even age = current age + lump sum ÷ annual pension, with no growth or discounting, rounded up to the next tenth of a year. When the lump sum is larger than your own payments but smaller than your payments plus the survivor's, the remainder is divided by the survivor payment instead, and the result is shown as years into the survivor period. If the lump sum equals your payments plus the survivor's exactly, the result calls it a tie. When the lump sum is larger than all of it, the tool shows the total pension income and the shortfall, plus the age you would have to outlive (current age + (lump sum − survivor income) ÷ annual pension) if that age is 100 or less. A monthly pension of $0 reads "Pension has no value. Take the lump sum." A lump sum of $0 reads "With a $0 lump sum, the pension pays more from the first payment."
- Required return: the yearly rate at which the lump sum, invested and paying out the pension each year-end (then the survivor payment), ends at exactly $0. Found by bisection between -99% and 30%. A negative result means the lump sum is larger than all the payments added up and still matches them while losing that much a year. Within 0.05% of zero it shows "about 0%". Above 30% the tool shows "more than 30%" instead of a number, and below -99% it shows "loses more than 99%". With a $0 pension there is no stream to match, and a $0 lump sum cannot fund any payment, so neither case shows a rate.
- 4% rule monthly = lump sum × 0.04 ÷ 12, set against the pension check. See the 4% rule.
- Chart: pension income added up year by year, next to the lump sum growing at your return while paying out the same income. The survivor years are charted only when the survivor payment is above $0.
Not modeled: cost-of-living raises on the pension, income tax on either choice, and the chance of living shorter or longer than the age entered. Verify the methodology or inspect the source code in your browser's dev tools.
Where to go from here
Sources
Verify badges in the text link to these sources. Figures, rates and rules change: check each source’s date before acting on it.
- Social Security Administration, SSA period life tables ↩
Calculators are educational estimates, not financial advice. Disclosures · How pages are reviewed