Finance & Economics / Personal Finance
Pension Lump Sum vs Annuity Calculator
Average life expectancy at 65: ~84 for men, ~87 for women
Typical: 4-6% for conservative, 6-8% for moderate portfolios
Most pensions: 0% (fixed). Some offer 2-3% COLA.
Understanding Pension Lump Sum vs Annuity
What's the decision? Many pension plans offer a choice: take a one-time lump sum or receive monthly payments for life (annuity).
Key Considerations:
- Longevity Risk: Live longer than expected? Annuity wins. Die early? Lump sum better for heirs.
- Investment Risk: Annuity is guaranteed. Lump sum depends on market performance.
- Inflation: Fixed annuity loses purchasing power. Lump sum can potentially grow.
- Taxes: Both are taxable as ordinary income when received
- Spouse Protection: Consider survivor benefits in annuity vs inherited lump sum
- Pension Solvency: PBGC insures most pensions up to ~$74k/year
Important: This is a major financial decision. Consult a financial advisor and consider tax implications before choosing.
Use this pension lump sum vs annuity calculator to compute personal finance results from your inputs.