Pension Lump Sum vs. Annuity Calculator

Enter the numbers from your offer letter. The calculator shows what your monthly checks are worth today, the annual return your lump sum would need to earn to keep up, and the age past which the pension wins.

Your current ageAge monthly payments would startFrom your offer letter, often 65. If you could start now, use your current age.Monthly pension benefitUSD / moSingle-life amount the lump sum would replace.Lump sum offeredUSDPlan-to age (longevity)A 65-year-old in good health should plan well into the late 80s or 90s.Safe return assumption% / yrUsed for present value and break-even. 4 to 6 percent is a common planning range.

Hurdle rate: what the lump sum must earn

3.9%per year

Invested at this annual return, your $250,000 would exactly reproduce $2,000/month from age 65 to age 88.

Value of your checks today

$203,254

Present value at 5% of $2,000/mo to age 88.

Offer as % of that value

123%

100% means the offer fully matches the stream it replaces.

Break-even age

101

Live past this age and the monthly pension pays out more than the lump sum could.

What this suggests: The lump sum needs a balanced-portfolio return to keep up with your pension. This is the gray zone where health, survivor needs, and your other income should decide. Read the full decision framework.

Educational estimate only, not financial advice. Uses a single-life benefit with no cost-of-living adjustment and ignores taxes, fees, and survivor options, all of which can change the answer. Your plan calculates offers with IRS 417(e) rates and mortality tables; this tool answers a different question: what your lump sum must earn to keep up with your checks.

How to read your results

Hurdle rate is the headline. Under roughly 4 percent: the offer is competitive with safe investments. Around 4 to 6 percent: a gray zone where the other decision factors should decide. Above 6 percent: you would need sustained stock-market returns just to match a guaranteed check.
Offer as a percentage of value shows how much of your check stream's present value the lump sum covers at your chosen return assumption.
Break-even age is when the pension overtakes the lump sum. Compare it honestly with your health and family history.

Calculator questions

How do I know if my pension buyout offer is good?

Compare the lump sum with the present value of the checks it replaces and look at the hurdle rate: the return the lump sum must earn to reproduce your pension. A hurdle rate near safe bond yields suggests a competitive offer; a hurdle rate at stock-market levels favors keeping the pension.

What discount rate should I use for a pension lump sum?

A defensible planning range is roughly 4 to 6 percent, in the neighborhood of what a conservative balanced portfolio might earn. Using a higher rate flatters the lump sum; using bond yields flatters the pension.

Does this calculator use IRS segment rates?

No, on purpose. Your plan already used 417(e) segment rates to produce the offer. This tool answers your side of the question: what the money must earn, in your hands, to match the checks for as long as you plan to live.