Pension vs Lump Sum Calculator
Compare a monthly pension with a one-time lump sum: the pension's present value and the return you'd need on the lump sum to match it.
For information and education only — not financial advice. Results are estimates based on the numbers you enter; check important decisions with a qualified professional.
How to use
- 1Enter the monthly pension, the lump sum offer and how many years you expect to collect.
- 2Enter a discount rate — the return you could reasonably earn investing the lump sum.
How it's calculated
Present value of the pension = monthly × (1 − (1 + r)⁻ⁿ) ÷ r. The break-even rate is the discount rate at which that equals the lump sum.
Frequently asked questions
What discount rate should I use?
A conservative investment return, often 4–6%. Higher rates make the lump sum look better.
What about cost-of-living increases?
If the pension has COLAs, it's worth more than this shows. Subtract the COLA from your discount rate to approximate it.
What other factors matter?
Your health and longevity, spouse survivor benefits, the pension plan's financial strength, and your need for flexibility.