Finance & Economics / Personal Finance

Pension Lump Sum vs Annuity Calculator

Lump Sum Offer

Monthly Annuity Payment (Lifetime)

Your Current Age

Estimated Life Expectancy

Average life expectancy at 65: ~84 for men, ~87 for women

Expected Annual Investment Return (%)

Typical: 4-6% for conservative, 6-8% for moderate portfolios

Expected Inflation Rate (%)

Annuity Cost-of-Living Adjustment (COLA) %

Most pensions: 0% (fixed). Some offer 2-3% COLA.

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.

See Also